News

Richland to shut hedge funds… Tiger Asia loses SFC challenge…

May 2, 2013 at 1:12 pm

Share this article

Hong Kong-based Richland Capital Management Ltd is shutting down its hedge fund operation, as reported to Reuters on Tuesday 30^th April according to Chief Investment Officer Alex Au. The decision to close down is unexpected, as Richland has outperformed industry peers in the Asian hedge fund industry since it was launched in 2006.

Richland, one of the best known in the region, manages assets worth USD100 million between two hedge funds. Richland made money for its Asia Absolute Return Fund each year since its launch, including a 5.3 per cent gain in 2008, when the global financial crisis unfolded.

Typically, hedge funds shut down in response to poor performance or clients withdrawing large amounts of money, problems Richland did not suffer. The Richland Asia Absolute Return Fund managed about USD75 million in February this year compared to USD10 million when it was launched in December 2006, according to a Richland investor newsletter.

The fund gained 14.1 per cent in 2012 and was up about 6 per cent in the first quarter of 2013, according to fund performance data seen by Reuters, outperforming a 10 per cent gain in the benchmark Eurekahedge Asia index last year and 5.8 per cent in the March quarter. A second fund, the Richland Emerging Opportunities Fund, returned 13.1 per cent last year and was up about 18 per cent in the first quarter of 2013.

So far, 23 hedge funds have shut down in Asia, compared with 18 launches, according to data from Eurekahedge. Last year, 169 hedge funds closed in Asia, exceeding 139 launches.

Tiger Asia Management LLC, which admitted in a U.S. settlement to illegally using inside information to trade Chinese bank stocks, lost a challenge to Hong Kong’s Securities and Futures Commission for their right to pursue it for the same offense.

Chief Justice Geoffrey Ma of Hong Kong’s Court of Final Appeal dismissed Tiger Asia’s bid after hearing about two hours of arguments and without calling on the SFC to respond. He said written reasons would be handed down later.

The ruling confirms the regulator’s ability to sue parties it suspects of market misconduct independently of a criminal prosecution or a civil inquiry. The New York hedge-fund firm claimed such action by the SFC was an abuse of process and won an initial ruling in June 2011, which was overturned last year by an appeal judge.

SFC Enforcement chief Mark Steward said that the decision vindicates the regulator’s position and strategy. The power is a key part of its strategy “in bringing wrongdoers face to face with the real consequences of their misconduct,” he said in a November speech.

The case is Securities and Futures Commission and Tiger Asia Management LLC, Sung Kook Hwang Bill, Raymond Park, William Tomita, FACV10/11/12/13 2012 in the Hong Kong Court of Final Appeal.

Preqin’s Hedge Fund Spotlight 2013 showed Long/Short Equity as the best performing hedge fund strategy of Q1 2013, which posted a cumulative net return of 4.43 whereas the long-only hedge funds were up 7.99 per cent over the same period, contributing significantly to the returns of L/S equity overall.Asia-Pacific focused funds returned the highest compared to any other region, rising as high as 8.9 per cent in Q1, followed by North American region gaining 4.42 per cent.

Long/Short Credit funds were also among the top gainers with a 3.52 per cent return for the last quarter. However, as seen historically, Event Driven category came at second place after L/S equity with a net return of 3.8 per cent in Q1. The gains in Event Driven strategy was attributable to increased hedge fund activism in the first quarter.

Other interesting facts from Preqin’s report are that while macro focused hedge fund launches decreased in the last quarter, investor interest in the strategy is at the highest since Q2 2012. Macro fund launches made up 14 per cent of all launches in Q1, whereas 29 per cent of investors responded that they are seeking macro funds, which is a significant increase in interest compared to Q4 2012. Investors’ spiked interest is of course related to Abenomics, which came as a blessing for global macro funds with short yen positions. Japan focused funds have broken records of high returns in Q1.

Of all hedge fund launches, 58 per cent were L/S equity, 14 per cent were Macro funds, 11 per cent Event Driven and 10 per cent were Relative Value hedge funds. While Macro launches were the second-most popular in Q1, their per centage is lesser than that recorded in Q4 2012 when 32 per cent of all launches were Macro hedge funds.

Across regions, 81 per cent of all newly opened hedge funds originated in the North America and Europe accounted for 12 per cent of all launches, which is lower than expected.

A new report from hedge fund lobby group AIMA focuses on the industry's softer side: its charity work.

The Alternative Investment Management Association has just released Contributing to Communities, a 44-page report on the charitable activities of hedge funds “from workplace giving schemes and industry fundraising campaigns for charity to individual examples of philanthropy.”

“With this report, which we believe to be the first of its kind compiled, we have sought to look at the hedge fund industry’s charitable and philanthropic activities globally, including projects and donations that support education, healthcare, the arts and disadvantaged communities throughout the Americas, Europe and Asia” said Andrew Baker, AIMA CEO, in a statement.

The United States, home to the largest number of hedge funds, leads the way in terms of charitable donations says the report including such examples as George Soros whose Open Society Foundation donated USD742 million to various causes in 2010, Paul Tudor Jones whose Robin Hood Foundation gave USD146 million to dozens of poverty-fighting programs in New York in 2012 and Moore Capital founder Louis Bacon who has spent close to USD400 million on land for conservation easements. In Europe, Brevan Howard's Alan Howard heads a charitable trust which donated over GBP3.7 million to Jewish religious education and health organizations while David Harding of Winton Capital gave GBP1 million to Berlin’s Max Planck Institute for Human Development through its family foundation.

In Asia, as the hedge fund industry grows, so does its interest in charity work, says AIMA, citing the success of Hong Kong's annual Fight Nite benefit—a boxing card featuring fund managers and service providers. In addition, says AIMA, a number of high-profile hedge fund managers—including Bill Ackman, Ray Dalio, Christopher Hohn, Julian Robertson, Jim Simons and Tom Steyer—have signed Warren Buffet and Bill Gates' Giving Pledge, vowing to donate the majority of their wealth to philanthropy.