The Big Mistake of a Singapore Hedge Fund: A Wake-Up Call for the Hedge Fund Industry in Asia

A Singapore-based hedge fund, Asia Genesis Asset Management, has announced its closure after losing most of its investors due to wrong bets on Chinese and Japanese stocks. The fund, which was once one of the best-performing macro funds in Asia, made “big mistakes” in predicting the market movements and failed to recover from its losses. 

The fund’s demise has exposed the risks and challenges that the hedge fund industry in Asia faces, and has called for a more prudent and professional approach to investing and managing money.

What went wrong for Asia Genesis?

Asia Genesis, founded by veteran trader Chua Soon Hock in 2011, was a macro fund that focused on trading currencies, commodities, bonds, and stocks across Asia. The fund had a stellar performance in its first two years, returning 11% and 5% respectively, and attracting investors from around the world. The fund’s assets under management peaked at US$120 million in 2013.

However, the fund’s fortunes turned sour in 2014, when it lost 4% of its value, mainly due to its bullish bets on Hong Kong stocks and bearish bets on Japanese stocks. The fund expected that the Hong Kong market would rebound from its slump, and that the Japanese market would decline due to the weakening of the yen and the slowing of the economy. However, the opposite happened, as the Hong Kong market continued to fall amid political and social unrest, and the Japanese market soared to a 34-year high, boosted by the government’s stimulus measures and the global recovery.

The fund’s performance worsened in 2023, when it lost another 4% of its value, as it failed to adjust its positions and strategies in response to the changing market conditions. The fund also faced an unprecedented withdrawal of about 19% of its fund in the first few weeks of 2024, as investors lost confidence and patience in the fund’s ability to recover and generate returns. The fund’s assets under management dwindled to US$20 million, and the fund decided to cease operations and return the remaining money to investors.

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What are the implications for the hedge fund industry in Asia?

The hedge fund industry in Asia has been growing rapidly in recent years, as the region offers abundant opportunities and diversification for investors and managers. According to data provider Eurekahedge, there were 1,765 hedge funds in Asia as of November 2023, managing US$240 billion in assets, up from 1,500 funds and US$180 billion in 2018.

However, the industry also faces many risks and challenges, such as the volatility and unpredictability of the markets, the complexity and diversity of the regulations and jurisdictions, the competition and consolidation of the funds, and the rising expectations and demands of the investors. The industry also suffers from a lack of talent and experience, as many of the funds are relatively new and small, and rely on the skills and reputation of one or a few individuals.

The case of Asia Genesis serves as a wake-up call for the hedge fund industry in Asia, and highlights the need for more discipline and professionalism in the industry. The fund’s failure shows that the hedge fund managers need to have a clear and consistent investment philosophy and process, a robust and flexible risk management system, and a transparent and accountable communication and reporting mechanism. 

The fund’s failure also shows that the hedge fund investors need to have a realistic and informed assessment of the fund’s performance and potential, a diversified and balanced portfolio of funds, and a long-term and strategic perspective of the fund’s objectives and outcomes.