Asia-focused hedge funds including those managed by APS Asset Management, Springs Capital and Pine River Capital Management gained in March as a market rebound helped managers claw back from the worst start to the year on record.
Both the $98 million APS Greater China Long/Short Fund and the Springs China Opportunities Fund surged nearly 15 percent, paring first-quarter losses to about 13 percent, according to APS Chief Investment Officer Wong Kok Hoi and an investor update from Springs seen by Bloomberg News. The $1.3 billion multistrategy Pine River China Fund returned almost 4.7 percent in March, cutting this year’s losses to just under 0.4 percent, said a person with knowledge of the matter.
In January, “the Chinese stock market was sold indiscriminately across the board as if China would soon face multiple crisis of historic proportions,” APS’s Wong said in an interview from Singapore. “A month later, sanity returned and those fears largely evaporated. Our portfolios bounced back in March and the recovery continued through April.”
Markets rallied in March and oil prices rebounded as the U.S. Federal Reserve indicated the case for slow interest-rate hikes, allaying speculation that a strengthening U.S. dollar will reduce demand for riskier assets. Chinese stocks were buoyed by better-than-expected profits from some companies, signs of a stabilizing economy and easing concerns about capital flows as the country’s currency gained.
The improving sentiment brought relief to Asia hedge funds which on average dropped 5.4 percent in the first two months of 2016, marking the worst start to the year since Eurekahedge began to compile data in 2000. They rose 3.4 percent in March, paring the year-to-date loss to 2.2 percent. China-focused managers, among the hardest hit earlier in the year, benefited from the stronger rally in the nation’s stocks listed both domestically and in Hong Kong.
Equity long-bias strategies contributed to gains for managers, according to Mohammad Hassan, Singapore-based senior analyst at Eurekahedge. Some 94 percent of regional hedge funds that have reported data for March posted positive returns, compared with 35 percent in February and 13 percent in January, he said.
Springs benefited in March from a rebound of its key holdings in the yuan-denominated, class-A shares traded on China’s domestic exchanges, as well as surge in Chinese property and technology stocks listed in Hong Kong, said a person with knowledge of the matter, who asked not to be identified as the fund is private. The Springs fund lost nearly 24 percent in January.
Pine River was able to limit its losses to 4.9 percent in January because of its flexibility to invest across assets, the person said. Unlike most China-focused hedge funds that concentrate investments in equities, the Pine River fund is multistrategy and trades stocks, convertible bonds and credit.
For Orchid Asia Group Management, March’s gains weren’t enough to post positive returns for the quarter. The $253 million Orchid China Master Fund rose 4.4 percent in March, paring this year’s loss to 8.2 percent, according to a performance update from the firm.
Other funds that rose in March include those from Wykeham Capital, PruLev Global Macro Fund and Sylebra Capital Management.
Wykeham’s Asia fund rose 7.5 percent to bring its year-to-date returns back into positive territory, according to Howel Thomas, the fund’s Hong Kong-based portfolio manager. he fund has advanced 5.6 percent this year. The fund’s investment in Alco Holdings Ltd. contributed to March gains, with the Hong Kong-listed maker of tablets for Wal-Mart Stores Inc. posting strong sales last month, he said. Alco shares advanced 20 percent in March.
The $63 million PruLev Global Macro Fund posted a 7.9 percent gain in March, extending this year’s return to 21 percent.
“We gained a lot due to the rebound of the global stocks, following the very dovish, constructive statements from major central banks,” said its Singapore-based manager Norman Tang. “Our holdings in US stocks, Chinese A-shares and Singapore index gained considerably during March.”
The $1.2 billion Sylebra Capital Partners Master Fund gained 2.4 percent for a first-quarter return of 6.3 percent, said a person with knowledge of the matter. The global equity long-short fund is led by Hong Kong-based former managers of Coatue Management and makes about 60 percent of its investments in Asia, focusing on telecommunications, technology and media companies, said the person.
Firms that weren’t able to participate in March’s market gains include Kingsmead Asset Management, the hedge fund firm started by former FrontPoint Partners executive John Foo. Kingsmead Asian Alpha Opportunities, which invests in stocks in Asia excluding Japan, fell 1.5 percent in March according to Hubert Yong, the firm’s chief operating officer.
Quad Capital Management’s long-short equity strategy fell 2.9 percent in March and is up 1.2 percent so far this year, said Hyung-Kyu Choi, the Hong Kong-based chief investment officer.
Spokespeople at Springs, Sylebra and Orchid declined to comment, while a Pine River spokesman didn’t immediately return a request for comment.