Asia multi-strategy hedge funds see big monthy 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 Goldman Sachs estimating Asia's predominating stock-picking hedge funds fell 15.2% in July, ​the steepest monthly drop on record.

Still, a monthly loss exceeding 5% is significant for these so-called multi-strategy platform funds, investors said, as they hire multiple managers adopting various strategies ⁠from equities, fixed income, macro to commodities, aiming to ensure low correlation to market direction and smooth volatility.

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, the best-performing Asia multi-strategy fund in the first half and 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 the 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%, while Hong Kong-headquartered Pinpoint Asset Management's main multi-strategy fund retreated 9% last month, sources said, while Singapore-based Arrowpoint Investment Partners posted a milder 2.6% loss.

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 didn't reply to ​Reuters' request for comment, while Arrowpoint declined to comment.

The following table shows Asia multi-strategy hedge fund performance:

Fund Name July YTD

Arrowpoint -2.6% 6.7%

Dymon Asia -6.5% 7.5%

Polymer -6.9% 11.5%

Asia

Pinpoint -9% 6.3%

Multi-stra

tegy

Source: Reuters reporting

(Reporting by Summer Zhen; Editing by ‌David Holmes)

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