* Bedwick to shut macro hedge fund by end of June -document
* Fund saw flat returns until March, was up 3.1 pct in 2011
* Small Asia hedge funds shut as investors prefer bigger
(Recasts top, adds analyst comment)
By Nishant Kumar
HONG KONG, June 4 Smaller-sized hedge funds are
increasingly throwing in the towel in Asia as they struggle to
attract money from risk-wary institutional investors, casting a
cloud over prospects of the $128 billion industry.
The latest to quit is former Lehman Brothers trader Allan
Bedwick, who is shutting his $120 million Asia-based fund after
giving it a two-and-half-year run, fund documents obtained by
Hong Kong-based Bedwick's global macro strategy fund is
Asia's newest hedge fund victim of the global economic woes as
fears of a worsening euro zone debt crisis, and slowing growth
drive investors toward the safety of large and well-established
funds. Nearly 40 hedge funds in Asia have shut this year.
Bedwick made money for his investors but could not attract
enough capital, a problem that raises a question mark on similar
plans of other traders who are eyeing moving out of bank
proprietary desks to start their own ventures.
"The truth is, you should not start a hedge fund unless you
can get a scale relatively quickly," said Richard Johnston, head
in Asia of London-incorporated Albourne Partners which provides
consultancy on hedge funds.
"Scale means starting over a $100 million and quickly
getting to half a billion and if you can't do that, it's going
to be a tough task," he added.
A shrinking industry spells troubles for start-ups, prime
brokers and other service providers who had pinned hopes on a
The top-5 prime brokers, for example, lost 90 clients
between them in the year through April and their collective
assets under management fell by $11.5 billion to about $90
billion, according to a survey released in May by industry
The Asian hedge funds industry never fully recovered from
shocks in 2008 and 2009, when more than $40 billion left
regional hedge funds and nearly 300 funds shut down, data from
industry tracker Eurekahedge showed.
Its assets are now about $50 billion below the $176 billion
peak hit in December 2007.
Historically, smaller hedge funds in the region relied
heavily on money from local and European fund-of-funds. A large
part of that money has not returned since the 2008 financial
crisis and has been replaced by investments from institutions
such as pension funds and endowments.
But these large investors have avoided smaller managers as
they can't take in big-ticket investments and are particularly
cautious about whom they invest with in these turbulent markets.
And while the institutional money has powered the growth of
bigger Asian managers such as Singapore-based Dymon Asia and
Hong Kong-based Senrigan, the lack of it has made many smaller
managers give up their plans to continue their own firms.
More closures of small hedge funds are likely in the months
ahead as investors punish underperformers and fund managers
reassess future plans after four tough years.
Eurekahedge estimates nearly seven in every 10 Asia funds
are below their 'high water mark', or their peak net asset
values above which they can charge performance fees.
Correlations between asset classes from commodities to
equities had started to break down earlier this year, opening
the way for funds to play asset classes against each other as
hedges or outright bets.
But risk assets have started moving in lockstep with each
other again and that is threatening to undo what was looking
like a benign environment for macro and long/short funds.
After a positive two months at the start of 2012, regional
hedge funds, as measured by the Eurekahedge Asia index, have
lost money in the last three months.
This year's closures include Novatera Capital, which managed
about $90 million in a long/short hedge fund, and Orvent Asset
which shut its $130 million event-driven hedge fund after its
Swedish seed capital investor pulled out at the end of April.
TIG Advisors also liquidated its 15-year-old, $210 million
global emerging markets hedge fund earlier this
Doric Capital, one of Hong Kong's oldest hedge fund firms
founded by former Man Group Plc executive Michael Nock,
and Thaddeus Capital Management also shut hedge funds recently.
The Sequence Fundamental Macro Fund, earlier known as OGI
Global Macro Fund that Bedwick started in October 2009 in Japan,
is currently returning capital to investors and will shut by the
end of June, according to a letter to investors seen by Reuters.
Bedwick declined to comment.
Macro hedge funds focus on major economic trends and events
and bet anywhere they see value, including stocks, bonds,
currencies, commodities and derivatives markets.
Bedwick's fund gained 0.1 percent in the first three months
of 2012 versus a 1.9 percent gain in the Eurekahedge global
macro hedge fund index. The fund reported a 3.1 percent gain in
2011, outperforming a 1.2 percent drop in the index.
The fund executive headed global macro trading at Lehman
Brothers and later at Nomura Holdings after the
Japanese company bought Lehman's Asia and European businesses.
(Additional reporting by Vikram Subhedar; Editing by