November 10, 2008 / 10:26 AM / 11 years ago

UPDATE 1-APAC Greater China hedge fund shut down -manager

(Adds further detail, background)

By Jeffrey Hodgson and Saeed Azhar

HONG KONG/SINGAPORE, Nov 10 (Reuters) - The APAC Greater China Fund, which at its peak managed $55 million, has shut down after suffering losses, joining a growing number of hedge fund casualties of the global financial crisis.

The manager of the Hong Kong-based hedge fund, Dr. Ken Lu, confirmed on Monday that after suffering losses of almost 16 percent in the first eight months of 2008, the decision was made to pull the plug.

The former Credit Suisse CSGN.VX and JPMorgan Chase & Co (JPM.N) equity analyst said assets had shrunk to just $10 million by the time the decision was reached to close.

“It was basically a decision reflecting both our and our investors’ view of the market in terms of opportunity out there in the short term, and also in terms of what we see as probable fund raising prospects for smaller funds like ours,” Lu told Reuters.

“Throughout September, we’d been talking to our remaining investors and everybody felt it was probably better not to try to basically tough it out.”

Asia’s hedge fund industry, one of the world’s worst performers even before volatility surged in September and October, is undergoing a major shake-out as the global financial turmoil shuts down a growing number of managers.

Research firm Eurekahedge estimates that 87 Asia-focused hedge funds closed in January-September, while 69 were launched. This compared with 66 closures and 124 launches during the same period last year.

It estimated there were monthly outflows of $4.3 billion in September and another $2.1 billion in August, but said the industry had still seen net inflows of $2.7 billion for the first nine months of this year.

The APAC Greater China Fund had gained more than 150 percent in 2007 and 87 percent in 2006. But Lu said it had also been forced to relaunch even before the global credit crunch began last year when a major fund of hedge funds investor withdrew its cash.

Lu said both fund of hedge funds managers and the smaller funds they invest in were likely to suffer from ongoing risk aversion. He said the long/short equity strategy favoured by many Asian funds was also likely to be out of favour for some time.

“Given where the markets are, smaller longer/short equity hedge funds are probably going to be the last in terms of pecking order when the liquidity flows come back,” he said.

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