Asia multi-strategy hedge funds see big monthly drawdowns

By Summer Zhen

HONG KONG, Aug 5 (Reuters) - ‌Some large Asian ​multi-strategy ​funds suffered their biggest drawdown this year in July as a brutal selloff in AI stocks across Japan, South Korea and China eroded gains accumulated in the ‌first half, sources close to the funds said on Wednesday.

Positions that had ⁠powered gains during the first half became a source of pain in July, as concerns over AI spending and ‌the Middle East conflict sparked heavy ‌selling in semiconductor stocks, hammering Asian chip giants.

The multi-strategy funds fared better than the broader industry, with some of the largest dropping between 3% and 9% in July, while Goldman ​Sachs estimated that Asia's main stock-picking hedge funds fell 15.2% over last month, the steepest monthly drop on record.

Still, a monthly loss exceeding 5% is significant for the multi-strategy platform ⁠funds, investors said, as they hire multiple managers that direct investments across everything from equities and fixed income, to macro and ​commodities, aiming to smooth volatility and ensure low correlation to market direction.

DIVERGENCE LIKELY TO PERSIST

The divergence in hedge fund performance is likely to persist, with ​AI-driven disruption and a high interest-rate environment rewarding ‌some managers while challenging others, market participants said.

Among individual funds, Hong Kong-based Polymer Capital Management, for instance, was the best-performing Asia multi-strategy fund in the ⁠first half. The fund, which oversees more than $6 billion, lost 6.9% in July, trimming its year-to-date gains to 11.5%, according to a source familiar with its performance.

The pullback was partly due to its equity positions ⁠in Japan, another source said.

Korea's benchmark Kospi Index slumped 22% last month while Japan's Nikkei 225 declined 8%.

Elsewhere, Singapore's $9 ​billion Dymon Asia multi-strategy fund posted a similar negative return of 6.5%, narrowing its January to July gain to 7.5%, sources said, while Singapore-based Arrowpoint Investment Partners posted a milder 2.6% loss. Also, Hong Kong-headquartered ‌Pinpoint Asset Management's main multi-strategy fund retreated 9% last month, sources said.

Arrowpoint, founded by former Millennium Asia co-CEO Jonathan Xiong, reduced fund level risk ‌ahead of July after identifying signs of excessive leverage in the market, including a growing reluctance among ⁠banks to extend incremental leverage for certain ‌positions in South Korea and ​Taiwan.

The move helped cushion performance, a source with knowledge of the fund said.

Polymer and Arrowpoint declined to comment.

(Reporting by Summer Zhen; Editing by David Holmes and ‌Tom Hogue)

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