Former Lehman Brothers trader Allan Bedwick is shutting his $120 million Asia-based fund after giving it a two-and-half-year run.
Hong Kong-based Bedwick's global macro strategy fund is Asia's newest hedge fund victim of the global economic woes as fears of a worsening euro zone debt crisis, and slowing growth drive investors toward the safety of large and well-established funds.
Smaller-sized hedge funds are increasingly throwing in the towel in Asia as they struggle to attract money from risk-wary institutional investors, casting a cloud over prospects of the $128 billion industry.
Nearly 40 hedge funds in Asia have shut this year.
Bedwick made money for his investors but could not attract enough capital, a problem that raises a question mark on similar plans of other traders who are eyeing moving out of bank proprietary desks to start their own ventures.
"The truth is, you should not start a hedge fund unless you can get a scale relatively quickly," said Richard Johnston, head in Asia of London-incorporated Albourne Partners which provides consultancy on hedge funds.
"Scale means starting over a $100 million and quickly getting to half a billion and if you can't do that, it's going to be a tough task," he added.
The Asian hedge funds industry never fully recovered from shocks in 2008 and 2009, when more than $40 billion left regional hedge funds and nearly 300 funds shut down, data from industry tracker Eurekahedge showed.
Its assets are now about $50 billion below the $176 billion peak hit in December 2007.
Historically, smaller hedge funds in Asia relied heavily on money from local and European fund-of-funds. A large part of that money has not returned since the 2008 financial crisis and has been replaced by investments from institutions such as pension funds and endowments.
But these large investors have avoided smaller managers as they can't take in big-ticket investments and are particularly cautious about whom they invest within these turbulent markets.
And while the institutional money has powered the growth of bigger Asian managers such as Singapore-based Dymon Asia and Hong Kong-based Senrigan, the lack of it has made many smaller managers give up their plans to continue their own firms.
More closures of small hedge funds are likely in the months ahead as investors punish underperformers and fund managers reassess future plans after four tough years.
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