Biggest Global & Asian Hedge Funds

1. Paulson Advantage Plus
Fund Asset: $2,171m
Strategy: Event Driven
3yr annualised rtn: 62.67%
2008 rtn: 37.80%
Location: New York

2. Balestra Capital Partners
Fund Asset: $800m
Strategy: Global Macro
3yr annualised rtn: 61.24%
2008 rtn: 45.78%
Location: New York

3. Vision Opportunity Capital
Fund Asset: $357m
Strategy: Relative Value
3yr annualised rtn: 61.13%
2008 rtn: 6.96%
Location: New York

4. Paulson Enhanced
Fund Asset: $2,535m
Strategy: Merger Arbitrage
3yr annualised rtn: 46.81%
2008 rtn: 12.45%
Location: New York

5. Quality Capital Mgmt – Global Diversified
Fund Asset: $747m
Strategy: Global Diversified
3yr annualised rtn: 36.22%
2008 rtn: 59.51%
Location: Weybridge, U.K.

6. Altis Global Futures Portfolio – Composite
Fund Asset: $1,340m
Strategy: Managed Futures
3yr annualised rtn: 32.89%
2008 rtn: 51.93%
Location: Jersey, Channel Islands

7. Belvedere Futures Strategy
Fund Asset: $365m
Strategy: Managed Futures
3yr annualised rtn: 32.00%
2008 rtn: 14.41%
Location: San Francisco

8. Pivot Global Value
Fund Asset: $754m
Strategy: Global Macro
3yr annualised rtn: 30.83%
2008 rtn: 51.90%
Location: Bermuda

9. RG Niederhoffer Diversified (Offshore) Class B
Fund Asset: $752m
Strategy: Global Macro
3yr annualised rtn: 30.67%
2008 rtn: 50.28%
Location: New York

10. Horseman Global
Fund Asset: $3,863m
Strategy: Equity Long/Short
3yr annualised rtn: 29.95%
2008 rtn: 31.26%
Location: London

Asia’s 25 biggest hedge funds in 2009
1..Sparx Group (Tokyo) US$4.82bn
2. Value Partners (HK) US$3.19bn
3. Artradis Fund Management (Singapore) US$2.722bn
4. ADM Capital (HK) US$2.2bn
5. Arisaig Partners (Singapore) US$1.996bn
6. Penta Investment Advisers (HK) US$1.910bn
7. Pacific Alliance Investment Management (HK) US$1.450bn
8. Target Asset Management (Singapore) US$1.400bn
9. Aisling Analytics (Singapore) US$1.186bn
10. Ortus Capital Management (HK) US$805m
11. LIM Advisors (HK) US$800m
12. Tree Line Investment Management (HK) US$760m
13. JL Capital (Singapore) US$618m
14. Sofaer Capital (HK) US$610m
15. Symphony Financial Partners (Singapore) US$600m
16. Asia Genesis Asset Management (Singapore) US$599m
17. Tower Investment Management (Tokyo) US$581m
18. Ward Ferry Management (HK) US$575m
19. Income Partners Asset Management (HK) US$520m
20. Lapp Capital (Singapore) US$500m
21. UG Investment Advisers (Singapore) US$496m
22. Argyle Street Management (HK) US$458m
23. Abax Global Capital (HK) US$455m
24. Brooke Capital (HK) US$450m
25. Asuka Asset Management (Tokyo) US$428m


p/s photo: Janet Hsieh Yi Fen

Most Successful Quant Hedge Funds Guy ... Ever

Degree from MIT; taught at Harvard. Worked as code breaker for Department of Defense during Vietnam. Founded Renaissance Technologies hedge fund firm 1982. Flagship Medallion fund averaging 34% annual returns since 1988. Most expensive fees in the business: 44% of profits, 5% of assets. Hires Ph.D.s instead of M.B.A.s; employees use computer modeling to find market inefficiencies. Launching fund for institutional investors that could handle $100 billion. Chairs Math for America; group donated $25 million last year to train 180 New York City math teachers.

James Simons, the founder of Renaissance Technologies, a hedge fund, once said, “Luck plays a meaningful role in everyone’s lives.” Simons, a 71-year-old former university professor and a celebrated mathematician, has been blessed with the stuff. His flagship fund, Medallion, has had average annual gains of more than 35% for 20 years. Last year he was named the best-paid hedge-fund manager in America by Alpha, a hedge-fund magazine, reportedly earning $2.5 billion. Medallion gained 80% last year, and this year is up a further 12%. What makes this feat even more incredible is that Simons, one of the members of Alpha ’s inaugural Hedge Fund Hall of Fame (June 2008), charges a fat 5 percent management fee and 44 percent performance fee. To put it another way, Medallion — which has about $7 billion in assets — was up almost 160 percent before fees. Renaissance, which had $25 billion in total assets at the end of 2008, began this year with about $20 billion, presumably because of redemptions.

But Medallion is 98% employee owned and has not accepted new money for 15 years.

But, when rumors spread in 2005 that he was starting a new $100 billion hedge fund, people outside of his field also began to take notice of him. So to cater to outside investors, Renaissance has since 2005 marketed another “mega fund” known as the Renaissance Institutional Equities Fund (RIEF). The problem is that this has not proved anything like as successful as Medallion. Before its launch a small army of Renaissance PhDs—there are more than 70 on the payroll—back-tested RIEF’s performance with a simulated portfolio of $100 billion. From 1992 to 2005, its theoretical return was more than double that of the S&P 500, with less than two-thirds of the volatility. Investors queued up like Trekkies waiting for tickets to the new film.

In the first two years RIEF raised more than $1 billion a month. With new money coming in faster than it could be invested, monthly contributions were capped at $1.5 billion. By August 2007 the fund was managing almost $28 billion. But in 2008 RIEF lost 16% and investors withdrew $12 billion from Renaissance, which was the largest prime-brokerage client of both Bear Stearns and Lehman Brothers, two investment banks that failed. The downward spiral has continued this year, with RIEF losing 17% so far. It now has less than $10 billion of assets under management.

Jim Simons, businessman and founder of Math for America Credit: AP Photo/Jason DeCrow

Simons explains the lopsided returns by saying that the two funds approach investing in different ways. Medallion attempts to identify “predictive signals” in the market. Its high-powered computers are programmed to profit from split-second price distortions. RIEF moves much more slowly. Most positions are held for a year. Like Medallion, it uses computers to buy and sell stocks. The fund is designed to provide investors with smooth returns, the success of which is measured against the S&P 500.

It has, in fact, beaten the S&P 500 by almost 4% a year since inception, but it has also trailed behind an index of its peers. In general, computer-driven funds are becoming less popular with investors. But Simons is RIEF’s biggest investor, which gives him every reason to want to improve its performance. This could be the biggest lesson of the whole episode. Though investors may think they are seduced by the wizardry of Renaissance’s computer-driven models, what they are really betting on is the magic touch of the man himself.

Before becoming one of the top money managers in the world, Simons was a decorated mathematician. His work was primarily in geometry, peripherally related to the Poincare conjecture. Simons’ work on differential geometry, which he did in collaboration with S. S. Chern, has proved useful to string theorists.

Simons is also a generous philanthropist. He has donated significantly to math education, universities, and plans to give over $130 million in the next few years to the study of the genetic basis of autism. He also recently gave $13 million to keep the Relativistic Heavy Ion Collider at Brookhaven National Laboratory running when the Department of Energy announced a funding shortfall this past year.

In a recent interview: How do you select people for your company? We look for people who have demonstrated the ability to do first-class research. We are not a teaching organization. We are a research organization. We hire people to make mathematical models of the markets in which we invest. We look for people who have had success, typically academically, although some people come out of an industrial laboratory like IBM or Bell Labs. Most come out of academia. They’ve had three to five years, written a few papers, and already have some kind of reputation. First and foremost, we look for people capable of doing good science, on the research side, or they are excellent computer scientists in architecting good programs. We have very high standards and it works. Our business is wonderful as a result.

Simons in 2006 was around the #280 mark as the richest America according to Forbes with a net worth estimated at $2.8bn. In 2009, Forbes had him zooming up to #55 with a net worth of $8bn. ... btw ... why are the over 100 books on Warren Buffett and not even one on James Simons???!!


p/s photos: Deborah Priya Henry

Why Things Will Get Worse First - November 30

Let me say that we are about 75% through the correction phase. Is it too early to go long on equities again, I would think so. There appears to be a few more shoes waiting to drop. We have the auto sector. There could a few more big corporate failures which could dent sentiment, e.g. GE Capital and a few big hedge funds, and some private equity companies as well. AIG is still in ICU and the bloody wound is not clotting properly, its still bleeding and the doctors are very tired.

The biggest shoe among the many shoes to drop will be the hedge funds. Yes, many hedge funds have sold down their positions as early as 2Q 2008. In fact, for Malaysia hedge funds and normal institutional investors have sold down Malaysia earlier than the rest of Asia due to our big political uncertainty, and the flip-flop policies on IPPs and CPO. The entire process of selling has seen its fury over the last two months in particular when funds of all kind had to de-leverage. Good stocks and almost all asset classes were sold down mercilessly. Stocks and bonds as well, even bonds of companies which are in no real danger of going bankrupt are now selling at distressed levels (e.g. 70-75 cents to the dollar).

Naturally there has been an oversold situation, but nobody is willing to come in to bat for these oversold situations yet. Thats largely because fund redemptions are still high and many are still expecting more redemptions. While up to 15%-20% of all hedge funds might have closed shop or is in the process of winding down, the actual number needing to close down by middle of next year could reach double that figure.

While many hedge funds and mutual funds have been selling down everything, there are still a huge number of hedge funds who have frozen redemptions temporarily. You can only freeze redemptions for so long. Unlike mutual funds which are traded daily, hedge funds clients can only request their money back on certain dates, usually once a month or quarter. Many have suspended the monthly dates, but they are unlikely to be able to hold out on the quarterly dates for redemptions requests. Guess the FINAL DATE for this year for most hedge funds investors to file to redeem their stakes. Yes, its November 30th.

Many traders are already shorting some stocks that are likely to to be affected. If you are close to Goldman Sachs, they have a list/index that tracks the top stocks held by hedge funds. Request the index stocks there from them. To get some insight on how hedge funds have been de-leveraging, the 3 weeks ending October 10th saw that GS index falling by a massive 34%, while over the same period S&P 500 fell only 28%. The lock up period is only a temporary haven, it might make for another round of selling. Only, this time it could be a lot worse as volume and bargain hunters may have used up some of their cash already over the last few weeks bargain hunting. 7,600 for the Dow looks more likely than 9,000 for now.

But like I said on the first line, its about 75% over, best to do nothing, best to give up the first 10%-20% in a bottoming rally rather than trading into a volatile market with a strong downside bias. Keep at least 70% cash.

p/s photos: Tracey Ip Chui Chui

Hedge Funds In Asia - Coping Well?

Asia hedge-fund closures jumped 19 percent this year, with the industry set to shrink for the first time as clients withdraw more money after funds in the region underperformed US/EU focused funds. Furthermore, Asia has a higher share of long-short funds, which have fared particularly badly in recent months. Asian markets are less liquid and smaller than global markets.

Due to losses and redemptions, the region's hedge fund assets have shrank by 8.4% to $175.7 billion in the first half of the year, from $191.7 billion. Asia ex-Japan Index was down more than 20 percent year-to-date at the end of August, among the worst of any sector.

About 70 hedge funds in Asia have shut down as of August, an increase from 59 in the first eight months of last year. There are 618 Asia-focused managers managing 1,199 hedge funds, compared with 1,196 funds in December. Assets under management fell to $168 billion in August, from $176 billion at the end of 2007. Asia's hedge-fund average returns fell 12.6% this year, compared with declines of 0.1% in North America and 5.8% in Europe. Asian funds grew 18% in 2007, outperforming both region.

Fresh flows into Asia-focused hedge funds plunged by 50 per cent to $530m in the second quarter of the year compared to the first quarter, according to Hedge Fund Research. Asian hedge funds are more likely to be equity only whereas US and EU funds tend to be multi-strategy and thus more able to take advantage of opportunities in the credit crisis.

p/s photos: Charmaine Sheh Si Man