LONDON The slowdown in emerging markets is hitting hedge fund Sloane Robinson hard, highlighting how, even as the industry attracts investors, managers can quickly fall from grace if they fail to perform.
The London-based stock-picker - one of the capital's oldest managers and once among its 10 biggest - has seen assets under management slide to around $2.5 billion, down more than four-fifths from a 2008 high of $15.1 billion.
Assets in the firm's flagship emerging markets fund - run by chief investment officer Richard Chenevix-Trench - have fallen to around $700 million, down from $1.8 billion at the end of 2011, and investors are bracing for a second consecutive year of losses.
"...Emerging market investment, as in so much of the world, has become about a search for niches of growth, where businesses can find room to develop irrespective of the slowing economies and still meet or exceed the expectations currently baked into prices," he wrote in a client letter obtained by Reuters.
The fund is down 1.7 percent to November 30, the letter shows. Last year it lost 17.2 percent. In 2010 made just 2.7 percent.
The fund has its biggest exposure to South Korea, Singapore, India and Hong Kong/China, where shares hit their lowest level in four years last month.
Chenevix-Trench also said in the letter he hiked a position in Samsung Electronics (005930.KS) to 5 percent, believing markets will reassess its valuation relative to Apple (AAPL.O).
He had indicated he would step down from his role for a six month break from March 2013 but a source familiar with the firm said the manager had now shelved the plan.
Dozens of hedge funds are struggling to adapt to the share price volatility brought by an economic slowdown in key markets like China, India and Brazil. The MSCI Emerging Markets Index .MSCIEF is only 5 percent ahead of its 2010 level - in contrast with the 450 percent rally in the 2003-2007 period.
Greg Coffey, one of London's best-known traders, made his name and fortune between 2004 and 2007 trading emerging markets, but subsequently struggled with losses and in October said he was retiring, aged 41, from Moore Capital.
This year the average fund has made less than half the MSCI index's 14 percent rise, Hedge Fund Research shows.
Sloane Robinson told investors in September that Chenevix-Trench's fund would be transformed into a more diversified global mandate while his Asia fund, which suffered big 2011 losses, would be shut, a second source close to the firm said.
The manager will launch a new emerging markets equities strategy to replace the re-mandated fund, the source added.
Hugh Sloane and George Robinson, both prominent donors to Britain's ruling Conservative Party, founded their hedge fund in 1993, years before Europe's now-dominant managers started out in the late 1990s and early 2000s.
The firm ran $15.1 billion in assets in 2008, making it the sixth biggest European hedge fund, according to Hedge Fund Journal's EUROPE50. This year, at end-June, it ranked 32nd with $3 billion in assets and that has since fallen to $2.5 billion.
Some of the firm's other funds have also fared badly. The International Portfolio is down 6.2 percent to November 30 - the third year of losses in a row. The smaller Frontier and Japan funds have made double-digit gains this year but are still to make their clients money since they launched.
Sloane Robinson declined a request for comment.
(Reporting by Tommy Wilkes; Editing by Mark Potter)