Concordia, GSA Capital Shut Asian Offices As Markets Slump By Bei Hu
Oct. 16 (Bloomberg) -- Concordia Advisors LLC and GSA Capital Partners LLP are among hedge fund managers shutting Asian offices as the industry posts negative returns and faces redemptions in the worst financial crisis since the 1930s. Duncan Smith, a Hong Kong-based partner at law firm Ogier, said he is aware of at least three international hedge fund houses either reducing their size or closing offices in the region, without identifying the companies. ``There could be a contraction,'' said Smith, who advises fund management companies and works on insolvency and corporate restructurings. ``I had not heard of any closing down up until two months ago. Everyone was moving in, not moving out.'' International hedge funds are shutting down, downsizing Asian operations, or delaying office openings for the first time, as poor returns force them to cut costs and fundraising in the region proves difficult. Hedge funds globally dropped 4.7 percent in September, their biggest monthly loss since the collapse of Long Term Capital Management LP in 1998, said Chicago-based Hedge Fund Research Inc. That brings this year's decline to 9.4 percent, setting the stage for the biggest annual loss from the now $1.9 trillion industry since HFR started to track data in 1990. Eurekahedge Pte, a Singapore-based data provider, estimated Asian hedge funds dropped nearly 17 percent in the first nine months, twice the 8 percent drop of its global hedge fund index, based on part of hedge funds it tracks reporting September data. Yesterday's Magnet International hedge funds had flocked to Asia in pursuit of new fundraising and investment opportunities before the collapse of the U.S. subprime mortgage market accelerated losses at global financial firms. The Securities and Futures Commission in Hong Kong approved 53 licenses for hedge fund managers in the year to March, a 47 percent increase from the previous 12 months, it said in an annual report published in June. Licensed hedge fund managers in the city, vying with Singapore to be a regional financial hub, topped 200, up from 154 a year earlier, it added. Asia-Pacific is home to nearly 28 percent of the world's population of high net worth individuals, or people with at last $1 million of financial assets, according to a June report by consultants Cap Gemini and Merrill Lynch & Co. China Investment Corp., the nation's $200 billion sovereign wealth fund, is among Asian institutions which have indicated interest in hedge fund investments. `Seismic Changes' GSA, a manager of more than $2 billion of funds using quantitative models and computerized trading systems, decided to pull out of Hong Kong, said Farshid Sadr-Hashemi, global head of marketing in its London head office. It opened the office, its second globally, with two employees relocated from London in August to increase its regional presence and improve understanding of Asia, he added. After ``seismic changes in the environment'' in recent months, the company decided to shut the office to reduce complexity of its business structure, Sadr-Hashemi said in a telephone interview. Concordia, which oversees more than $1.7 billion worldwide, at the end of July released most staff members of its Singapore office which opened in April 2006, Basil Williams, its New York- based chief executive officer, said in an e-email, declining to specify the number of employees affected. The Singapore office was formally closed down late last month. Closing down the Singapore office ``fits squarely into our goal of achieving our target returns and strengthening our ability to grow in a very challenging environment for hedge funds,'' he said in the e- mail. `Opportunity Cost' Some international houses with multiple offices in Asia have consolidated their operations into one location before, said Duncan MacKay, a Hong Kong-based recruiter focusing on hedge fund jobs at Sheffield Haworth. This is the first time hedge fund managers are withdrawing from the region on such a scale though, he added. ``For some, the opportunity cost of being here is now outweighing the actual benefit,'' said MacKay. Hedge fund managers in Europe and U.S. may delay plans to set up offices in Asia by six to 18 months until market conditions improve, said Smith. International houses are pulling out of Asia and cutting costs as investor redemptions surge after the bankruptcy of Lehman Brothers Holdings Inc., the sale of Merrill Lynch & Co., and the U.S. government bailout of American International Group Inc. last month. ``When you break into a new market, you will spend a lot of money and it may be a while before you turn a profit,'' said Smith. ``People are very expensive here and it's very hard to get high-quality people for your operations. One of the reasons it may have been happening is people have found it harder than expected to raise money in Asia and capital raising would often have been a key driver for opening here.'' Temporary Setback The departures may be temporary, said Smith. Asia continues to attract international managers, including those planning to use the market decline to acquire talent and pursue investment opportunities in the next six months, MacKay added. AM Investment Partners, Millennium Capital Management, Horizon Asset are among fund managers licensed by Hong Kong's Securities and Futures Commission in September, according to a SFC bulletin. Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising asset prices, and participate substantially in profits from money invested. To contact the reporter on this story: Bei Hu in Hong Kong at [EMAIL PROTECTED] Last Updated: October 15, 2008 22:44 EDT --~--~---------~--~----~------------~-------~--~----~ Thanks for being part of "PoliticalForum" at Google Groups. For options & help see http://groups.google.com/group/PoliticalForum * Visit our other community at http://www.PoliticalForum.com/ * It's active and moderated. Register and vote in our polls. * Read the latest breaking news, and more. -~----------~----~----~----~------~----~------~--~---
