Ex-Goldman, Morgan Stanley traders' Asia vol hedge fund boosts assets

Mon May 23, 2011 1:43am EDT

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* Assets grow 15 times since Aug launch to $60 mln

* Aims to boost assets to $100 mln by end of 2011

* Fund has returned about 11 percent since launch

By Nishant Kumar

HONG KONG, May 23 (Reuters) - RSR Capital, a hedge fund launched by former Goldman Sachs Group Inc and Morgan Stanley traders, aims to boost assets by more than 60 percent to $100 million this year as its strategy gains investor favour, said partner Christophe Delorme.

Singapore-based RSR Capital's volatility hedge fund, Caerus Arbitrage Asia, started trading with $4 million in August last year and now manages about $60 million, said Delorme, former head of Japanese over-the-counter multi-products at Newedge Group.

Volatility, the rate of change in the price of an asset, has an inverse relationship with price. Funds such as the one from RSR Capital tend to do well when markets are falling as volatility increases.

Caerus Arbitrage Asia gained 4.4 percent in March, its highest monthly return, as markets fell following unrest in North Africa and Japan's earthquake.

By comparison, hedge fund on an average returned 1.1 percent in March, according to data from industry tracker Eurekahedge.

"We are expecting more shocks than that, not coming from events like this one, but economic events," Delorme told Reuters in a telephone interview.

He said it was a good time to bet on the strategy as issues in the Middle East and sovereign debt crisis in Europe were not resolved and "you don't know what's going top happen after QE (quantitative easing)."

"We are just getting prepared because we think the big shock could happen tomorrow or it could happen in six months," he said.

RSR Capital's other partners are Remi Colinmaire, former head of index volatility trading in London and Tokyo at Goldman Sachs, Serge Handjian, former head of equity derivatives in Tokyo at Barclays Capital and Robert Webb, who ran Asian index option trading for Morgan Stanley.

The fund, which counts fund of hedge funds among its major investors, has gained about 11 percent since its launch in August and aims to deliver 20 to 25 percent per year.

It follows multiple strategies such as mean reverting and pattern recognition and plans to cap at $500 million.

"We think for that strategy, the amount of the money is maximum. We think the market can only hold $400-500 million," Delorme added. (Reporting by Nishant Kumar; Editing by Chris Lewis)

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