UPDATE 1-Britain-based Wessex closing Asia hedge fund on asset slump

Tue Nov 15, 2011 10:23pm EST

* Asia Pac hedge fund assets had dropped to $6 mln

* Firm also closing gold, natural resources hedge funds

* Says funds too small to grow back to critical mass

By Nishant Kumar

HONG KONG, Nov 16 (Reuters) - Britain-based Wessex Asset Management is closing three hedge funds, including one that invests in Asia-Pacific, the money manager said in a letter to investors, following a drop in assets under management and double-digit losses in 2011.

The closure lengthens the list of hedge funds shutting down this year as the market turmoil keeps investors on the sidelines, making it tough for managers to raise assets.

Assets of the long/short equity hedge fund Wessex Asia-Pacific Fund, which once managed more than $270 million, had dropped to $11 million. The fund's net asset value had slumped about 27 percent in 2011 to October, the letter showed.

Its gold hedge fund, which had started trading in 2007 with more than $50 million of committed capital, was down 37 percent this year and the asset had dropped to $3 million.

The natural resources fund, which managed peak assets of more than $330 million in 2008, was down to $6 million and had lost nearly 34 percent in the first 10 months of 2011.

"Our funds are now too small to have any realistic prospect of growing back to critical mass, so the directors have no option other than to close Wessex Asia-Pacific Fund, Wessex Natural Resources Fund and Wessex Gold Fund," the hedge fund said in a letter to investors on Tuesday.

Peter Chesterfield and Tim Weir founded Wessex in October 1999 after working together at British insurer Abbey Life.

"We still believe in value investing in Asia, in the commodity super-cycle and the gold bull market, but value investors need longer holding periods than are allowed to small hedge funds in these markets," the firm said.

More than 80 hedge funds in Asia have closed down this year as investors shy away from allocating fresh capital to the region, according to data from industry tracker Eurekahedge.

Asia-focused hedge funds recorded a net outflow of $1.9 billion in September, their first monthly outflow in 17 months.

An e-mail to Director of Marketing Douglas Sloane was not answered.