| HONG KONG
HONG KONG Jan 29 An Asia hedge fund run by
former Nomura Holdings Inc trader Benjamin Fuchs returned 31.6
percent last year as bets on credit markets paid off, making it
one of the best performing Asian funds led by a high-profile
The returns by Fuchs, who led the Global Opportunities Group
at Nomura as one of the region's top paid proprietary desk
traders, contrast with single-digit gains for most large or
well-known hedge funds in Asia. A few ended the year losing more
than 10 percent.
BFAM Partners, which manages $400 million, made most of the
returns towards the end of last year, gaining about 25 percent
in the last quarter, a copy of a letter to investors obtained by
The fund, which was launched only in June last year,
returned nearly 9 percent in December alone.
"Sticking with our core thesis that low global rates, low
default rates and reduced macro headline risk will continue to
drive credit spreads tighter and provide a constructive equity
environment, paid well," the firm wrote to clients this month.
His success is rare at a time when a number of traders, who
moved out as banks comply with regulations seeking to ban them
from trading with their money, are struggling with their
Among well-known Asia funds, Fuchs appears to have been only
outdone by former Credit Suisse trader Charlie Chan's
$105 million Splendid Asia macro hedge fund, which gained 63
percent last year betting on real estate investment trusts,
bonds and currencies.
It is also a shot in the arm for Asia's $127 billion hedge
fund industry, which has seen large funds underperform while
those with good returns have languished as they are often too
small to attract investors.
Asia-focused hedge funds returned about 10 percent in 2012
as measured by the Eurekahedge Asian index, underperforming an
18.6 percent gain for MSCI's broadest index of Asia-Pacific
shares outside Japan.
Fuchs had a strong track record at Nomura where the
team he led produced a 48 percent return in 2009 and 20 percent
gain in 2010. Returns in 2011, when peers in the Eurekahedge
Asia index lost an average 8.4 percent, was about 1 percent.
The firm remains optimistic about credit markets.
"New issuance will begin in earnest during January and has
the potential to re-price credit better as demand persists in a
low interest rate environment." BFAM wrote to clients.
An e-mail and a telephone call to BFAM chief operating
officer James Singh seeking further comment about the fund's
performance went unanswered.
BFAM's Asian Opportunities Fund trades credit, equity-linked
instruments such as convertible bonds and volatility products
like currencies and equity derivatives.
Its performance in December was driven mainly by two factors
- demand for lower-rated credits and a strong rally in bonds
issued by Chinese solar equipment maker LDK Solar Co Ltd
, according to the newsletter.
LDK Solar bonds shot higher after bondholders consented to
covenant changes that gives the company more flexibility to
pursue strategies in liquidity management and restructuring.
The fund also benefited as yield hungry investors bought
lower rated papers, with bonds from B-rated companies like
Yuzhou Properties Co Ltd and China SCE Property
Holdings Ltd in demand.
High-yield Chinese property bonds gave a return of 45
percent in 2012 on a weighted basis, according to Deutsche Bank.
The JP Morgan Asia Credit Index for high-yield bonds rose 20.4
percent last year, compared to just 11.3 percent for investment
Hedge funds' credit strategies range from direct lending to
companies to trading fixed income securities. Other Asia funds
with such strategies that did well included Double Haven Asia
Absolute Bond Fund, which was up 20.6 percent, while the
Prudence Enhanced Income hedge fund gained 16.4 percent.