Hedge fund Quant says assets down 43 percent

SINGAPORE (Reuters) - Quant Asset Management, a hedge fund manager that uses computer models to invest, said its assets slid 43 percent in the past year on fund redemptions, but is still targeting high returns amid cheap stock valuations.

Frank Holle, co-founder of the Singapore-based hedge fund, said he sees good opportunities to make money in volatile markets over the next three to six months, and is aiming for a 20-30 percent gain this year for its global and Asian funds.

"With inefficiencies in the markets, there are some tremendously interesting valuations and companies with good prospects," Holle said on Wednesday ahead of a Reuters Hedge Funds and Private Equity Summit.

"In an investment career that doesn't happen a lot."

Quant's assets have fallen to $120 million (82.3 billion pounds) from $210 million a year ago as a battered fund of hedge funds withdrew cash, he said.

"First of all they lost a lot of money with their investments and then they want to get money back because their investors are redeeming," he said, adding it will take another three to six months to attract fresh inflows into its two funds -- QAM Global Equities and QAM Asian Equities.

The firm, founded in 2003, selects around 200 stocks for its global and Asian portfolio once a month from about 6,600 stocks using computer models, based on programmes that track stock valuations, earnings growth and changes in analyst ratings.

He said the average PE ratio in its Asia fund was 5, and for its global fund an average of 10.

Quant's $95 million global fund, most heavily weighted in U.S., UK and Canadian stocks, is up 6-7 percent this year, but the Asian fund has lost 23-24 percent.

The global fund rose 0.5 percent last year, but its smaller Asian fund was down 11 percent last year. The big weightings for its Asian fund are South Korea, Taiwan, Hong Kong and Singapore, focusing on sectors such as computer hardware, drugs and food.

Holle said the firm can hedge its position by going long on stocks and shorting the market, but if the market is bullish the computer models can allow it to reduce the short position and increase its exposure.

"Our clients are looking for more exposure to the market. So instead of going into a market-neutral fund, they will be going into directional funds and some are talking about going long only and investing in exchange-traded funds," he said.

Holle said that the firm uses only 40 percent leverage, unlike some of the big funds that have imploded in the West due to as much as 200 percent leverage or more.

He said investors would return to the industry and that would allow it to double its assets in two years to $250 million, but the next three to six months will be difficult for markets. A year ago Quant was talking to investors about fund raising.

Holle said he expects only 60-65 percent of hedge funds that were around in Asia in 2007 to survive by the end of 2009.

"You still have a lot of new funds being set up as opportunities are being created," Holle said.

(Editing by Rupert Winchester)