HONG KONG (Reuters) - Macquarie Group Ltd's MQG.AX market-neutral long/short Asia hedge fund gained 10.3 percent and nearly tripled assets to $640 million (406 million pounds) last year, its fund manager said, while many hedge funds in the region were starved for capital.
By comparison, the Eurekahedge Asia Long/Short equities index was up 7.3 percent, while the MSCI Asia Pacific Index in local currency returned about 4 percent.
Andrew Alexander, who co-manages the Macquarie Asian Alpha Fund, said the fund could have a soft close when assets reach close to $1 billion but had the capacity for about $1.25 billion.
“The pipeline is strong. We are seeing a number of British and U.S. institutions that are interested in the product,” Alexander told Reuters in a telephone interview late on Wednesday.
Steadier returns with low volatility had lured institutional investors who consider the fund a good way to achieve their asset liability management objectives, said the veteran fund manager, whose previous employers include hedge funds such as LIM Advisors and Pacific Group.
He said Macquarie’s global marketing presence and liquidity track record during the financial crisis, when the fund honoured redemptions worth about $500 million in 32 days, also helped in 2010 when flows into Asian hedge funds started to revive.
“I think investors remember them,” he said, adding that lower competition also helped the fund corner assets looking for market-neutral hedge funds in Asia.
There are hundreds of Asian long/short hedge funds, but Alexander estimated that only a handful offered market-neutral strategy and institutional-grade services to attract insurance or pension funds, which have become choosier since the financial crisis.
Market-neutral strategy is aimed at profiting from both rising and falling prices to exploit market inefficiencies and targets the fund beta, or market risk, to be equal to zero.
The Macquarie Asian Alpha Fund has returned 11 percent annually since its launch in 2005 with volatility of about 5 percent. By comparison, the MSCI Asia Pacific Index in local currency has given 0.7 percent annually with volatility of more than 22 percent.
Alexander said the fund had no country, sector or currency biases and applied quantitative strategies to filter out stocks and avoid active risk in volatile Asian markets.
“People do want to believe in the Asian growth story and they do want to believe that people can get them rich quickly. The stats are however the markets have not delivered over reasonably long-term period,” he said.
The fund screens nearly 5,500 Asian stocks and places bets on hundreds of them. It aims to generate returns through individual stock selection by going marginally long or short on them.
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