(Bloomberg) — A surge in Chinese stocks last month helped Asia hedge funds pull ahead of global peers for the first three quarters, after three years of trailing performance.
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Quantedge Capital Pte., Will Li’s Ocean Arete Ltd. and Timothy Wang’s Monolith Management were among funds whose wagers on China’s introduction of more aggressive stimulus paid off.
September gains of almost 5% pushed Asia fund returns to 9.7% for the first nine months of the year, outpacing the 8.1% average increase for peers globally, according to Eurekahedge Pte indexes. They delivered nearly 4.9% in gains in September compared with 1.5% for the global average.
The Fed’s half-point rate cut last month paved the way for China to announce a barrage of easing measures without having to worry about a sharp depreciation of its currency. The MSCI China Index jumped 23% in September, the most in almost two years, as Beijing cut banks’ reserve requirements and allowed millions of households to renegotiate lower mortgage rates. The rally lifted the nine-month return for the China gauge to about 25%.
China-focused funds weren’t the only ones posting outsized gains.
Li’s Arete Macro Fund put on bullish Chinese equity index futures trades in early September. That powered a 7.5% gain for the month, according to two people with knowledge of its performance. That lifted returns for the first nine months above 13%.
Timothy Wang’s more than $300 million Monolith Management’s global technology fund surged 16% last month, boosting this year’s gain to 50%. It pivoted toward China in mid-September, expecting the country to adopt more accommodative and supportive policies, he said.
Its monthly return benefited from double-digit surges in Chinese e-commerce company PDD Holdings Inc., online securities broker Futu Holdings Ltd., online property platform KE Holdings Inc. and after-school tutoring company TAL Education Group.
“We are anticipating an economic policy shift, especially after the Fed rate cut,” Wang said earlier this month. “China was the most underweighted among investors.”
Other funds benefited from a wider range of trades.
The $4 billion Quantedge Global Master Fund rose 7.4% in September, extending this year’s advance to 29%, according to a spokesperson. Fixed income and commodities led gains across the asset classes that the fund trades.
Hermes Li’s Aspex Master Fund pulled off another 5.6% month to finish the first nine months nearly 33% up, despite its $9 billion size, according to people with knowledge of the matter. A variety of trades contributed to profits, ranging from China to Japan, including technology, financial and industrial stocks, said one of the people.
Jim Lim-led Modular Asian Macro Fund surged 1.6% during the month for a 5.6% gain this year. Calls on macro trends in various countries paid off, said Lim. Those included China’s surprise rate cut in late September, Singapore rates trading higher on tighter liquidity into quarter end. Malaysian Ringgit appreciated on strong fundamentals and exporting converting their greenback holdings into home currency.
Pascal Guttieres’s new equity capital markets specialist fund gained 2.1% in September, its first full month of trading, he said. It made money from block trades and global depositary receipts offerings as well as index rebalancing. That latter included Alibaba Group Holding Ltd.’s inclusion in an arrangement that allows mainland Chinese investors to trade Hong Kong shares of the homegrown e-commerce giant via an exchange link program. Alibaba jumped 27% in Hong Kong trading in September.
James Chen steered his Ovata Equity Strategies Fund to a 4.1% surge in September, with a nine-month gain of nearly 13%, said people with knowledge of the matter. Winning trades sought to profit from the pricing anomaly of related securities, the inclusion and exclusion of stocks from indexes, swings in share prices and convertible bonds.
Representatives of Ocean Arete, Aspex, Astignes, Ovata, Panview and Brevan Howard declined to comment. A spokesperson for Polymer was not immediately able to comment. Winton did not reply to a message seeking comment.
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