UPDATE 1-Fast growing Asia hedge fund Segantii hit by resignations

Thu Jan 30, 2014 2:26am EST

Related Topics

* Segantii hit by five recent resignations

* Fund suffered two straight years of underperformance

* Assets surged to $750 mln after 41 pct gain in 2011 (Adds details about fund's performance, quote from industry consultant)

By Nishant Kumar

HONG KONG, Jan 30 (Reuters) - Segantii Capital Management, one of Asia's fastest growing hedge funds, has been hit by five resignations in the last few weeks, people with knowledge of the matter told Reuters, after the firm saw its first annual loss.

Such an exodus is rare in the industry, and it marks a sharp u-turn for a fund that has grown to manage about $750 million from just $25 million in 2007, making it one of the biggest capital raising successes in the region.

The departures are related in part to a difficult atmosphere at the fund that emerged after two straight years of underperformance compared to peers, the people said. Last year Segantii lost 1.7 percent in its first annual loss, according to the fund's newsletter.

The current staff turnover follows at least six departures last year, including its Chief Operating Officer Nigel Hellewell, who left just a year after joining the firm.

"Historically it's been very difficult for a mid-size boutique hedge fund to recover from this level of professional departures," said Peter Douglas, founder of Singapore-based hedge fund consultancy GFIA.

"It's massively disruptive. It's going to be a two to three year rebuilding exercise for any such firm," he added.

Key recent departures include Fei Chen, who was responsible for capital markets and event driven investments. He left this month after nearly five years at the firm, sources said. Kirtes Bharti, head of financing, will leave next month, sources said. Reached by phone, Chen and Bharti declined to comment.

Derek Tam, who helped manage relative value strategy, has resigned along with Patrick Ko, who runs the firm's middle office operations, according to the sources. Convertible bond and volatility trader, Lewis Fellas, has handed in his resignation and will leave next month, the sources said.

Tam, reached by phone, declined to comment. Efforts to reach Ko and Fellas were unsuccessful.

Segantii's Chief Executive, Kurt Ersoy, speaking to Reuters by telephone, declined to comment on the resignations.

Hong Kong's securities regulator has issued 41 staff licences to Segantii since the fund's launch, according to data compiled by webb-site.com, which is run by former independent director of the Hong Kong Exchanges & Clearing, David Webb. The hedge fund had only 18 licence holders as of Jan. 29, the data shows.

TWO TOUGH YEARS

Segantii was founded by Simon Sadler, a former head of Asian equity trading for HSBC Securities, who is also the fund's chief investment officer.

In 2008, when Asian hedge funds tumbled 20 percent, Segantii's hedge fund returned 23.8 percent, one of the few to make money in the region when the global financial crisis wiped out hundreds of billions of dollars from the world markets.

Investor interest in Segantii surged further after the fund scored its biggest gain of 40.75 percent in 2011 when the Eurekahedge Asian index fell 7.4 percent, according to a newsletter obtained by Reuters.

Its assets more than doubled over the next two years but the hedge fund is yet to prove that it can continue generating pre-2012 type returns with a larger asset base.

The fund gained 4.8 percent in 2012 and lost 1.7 percent last year when the Eurekahedge Asian index rose 9.8 percent and 15.9 percent, respectively. (Reporting by Nishant Kumar; Editing by Michael Flaherty and Edwina Gibbs)

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