Abax to Open Tudor-Backed Macro Hedge Fund to Outside Investors
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By Bei Hu
May 19 (Bloomberg) — Abax Global Capital Ltd., a Hong Kong-based asset manager part-owned by Morgan Stanley, plans to open a hedge fund backed by Tudor Investment Corp. to outside investors for the first time.
The Abax Dymon Asia Macro Fund, which started with $113 million in August 2008, seeks to profit from regional economic trends. The fund will have a “clawback” arrangement under which half of the 20 percent performance fee earned is repaid to investors if the fund loses money in the next year.
Investors are demanding a revamp of hedge fund fees, typically 2 percent of the assets overseen and 20 percent of the profits made, to prevent managers from taking home hefty fees in a profitable year, only to leave investors to bear losses in the next. Hedge funds globally lost an average 19 percent in 2008.
“We want to let investors know that we’re in this together,” said Danny Yong, the fund’s chief investment officer, in an interview yesterday.
Tudor, the $10.5 billion Greenwich, Connecticut-based hedge fund company founded by Paul Tudor Jones, contributed the majority of the initial capital for the Asian macro fund, with the rest coming from Abax partners, Yong said. Abax raised $300 million at inception and now oversees $455 million.
The Abax macro fund, which will open to outside investors from July 1, trades interest rate, currency and equity index derivatives. It has outperformed the Eurekahedge Asia Macro Hedge Fund Index since inception, according to Singapore-based Yong, who declined to give specific numbers, citing a confidentiality agreement with Tudor. The index gained 4.4 percent in the first four months, after losing 7.4 percent last year.
Macro funds may appeal to investors who remain wary of stock market risk and are seeking to invest part of the record amount of cash they hold in easy-to-sell assets, Yong said.
“Investors are in a dilemma as to what to do with their cash,” Yong, 37, added. “Sitting on the cash right now may not be optimal. But going headlong into buying equities and just holding them for the next five years is pretty scary as well, seeing how volatile the equity markets are.”
The MSCI Asia-Pacific Index has gained nearly 40 percent from a one-year low on March 9.
Because of the absence of a clear theme this year, the fund will try to profit by trading across asset classes, exploiting time lags between changes in one asset market and the ripple effect on another, Yong said. For example, buying by U.S. and European funds has pushed up Asian stocks, but may only strengthen Asian currencies later when trades are settled.
“At present in Asia, these asset classes are generally traded in a siloed fashion,” he said. “The managers who trade equities only trade equities. The managers who tend to trade fixed income or interest rates only do that.”
Yong set up and ran Citadel Investment Group LLC’s Asia currencies, interest rates, relative value and macro businesses and headed Goldman Sachs Group Inc.’s Southeast Asia foreign exchange and interest rate derivatives before that. He is a founding partner of Abax.
Tudor founded his hedge fund company in 1984 at the age of 30. His flagship BVI Global Fund, a macro pool, has generated 22 percent average annual return since its formation in 1986.
Abax, with offices in Hong Kong and Singapore, initially focused on the so-called “special situations” investments in private and public-sector companies involved in events such as mergers and acquisitions, asset sales and large share buybacks.
To contact the reporter on this story: Bei Hu in Hong Kong at email@example.com
Last Updated: May 18, 2009 21:12 EDT