Key Takeaways
- • Asian hedge fund managers are rapidly adopting quantitative strategies in response to disappointing equity fund performance, with major launches underway in Singapore, Hong Kong, and Beijing from players including Thirdrock Group, Lucerne Investment Partners, and Hantak Investment Advisors.
- • Year-to-date performance data through September 2018 shows quant strategies investing in Asia outperforming China equity hedge funds by 4.6 percentage points (quants up 1.8% globally, Asia quants up 3.4%), despite equity funds outperforming algorithmic funds in three of the past four years.
- • Family offices and institutional investors are rebalancing allocations toward computer-driven strategies, citing lower correlation with traditional markets and perceived emotional discipline advantages during volatile periods—Junson Capital has committed to evaluating quant funds for potential investment within two years.
- • The shift reflects a broader global trend toward systematic trading as investors seek diversification from traditionally equity-heavy Asian hedge fund portfolios that have recently underperformed.
Summary
Asian hedge fund managers are accelerating adoption of quantitative investment strategies as institutional investors and family offices seek alternative approaches following disappointing returns from traditional equity-focused funds. According to Bloomberg reporting, several high-profile launches are underway across the region's major financial centers, signaling a structural shift in how capital is being deployed in Asia's hedge fund industry.
In Singapore, the $2 billion multi-family office Thirdrock Group has launched a dedicated quant fund, while competitor Lucerne Investment Partners is evaluating a similar launch for next year. Hong Kong is attracting notable talent and capital toward quantitative strategies: Charles Wang, formerly a portfolio manager at Bosera Asset Management, is preparing to launch a vehicle on OP Investment Management's platform, and Hantak Investment Advisors—which operates a quantitative fund from its Beijing base—plans to open a comparable offering in Hong Kong. This geographic expansion reflects growing institutional demand for algorithm-driven strategies across the region.
Performance data supports the strategic rationale behind this shift. Through the end of September 2018, quant strategies investing in Asia generated a 3.4 percent return, beating the 1.8 percent global return for quant funds overall, according to data provider Eurekahedge Pte. More significantly, China equity hedge funds have declined 1.2 percent year-to-date, underperforming these algorithmic strategies by 4.6 percentage points—a sharp reversal from the three of four prior years when equity hedge funds dominated quantitative returns. Will Tan, managing director at Principle Partners Pte, attributes investor migration toward systematic trading to the search for diversification and lower correlation with traditional market exposures.
Family offices are beginning to institutionalize this shift. Junson Capital, a Hong Kong-based family office, is actively meeting with quantitative hedge fund managers in both the U.S. and Asia with plans to make its first allocation within approximately two years, according to Maggie Chen, head of portfolio management. She characterized the broader investor appetite for quants as part of a fundamental industry transition driven by yield-seeking behavior. The appeal lies partly in the theoretical emotional discipline of computer-driven strategies, which proponents argue are better positioned to protect capital and generate returns during periods of elevated market volatility.
In Singapore, the $2 billion multi-family office Thirdrock Group has launched a dedicated quant fund, while competitor Lucerne Investment Partners is evaluating a similar launch for next year. Hong Kong is attracting notable talent and capital toward quantitative strategies: Charles Wang, formerly a portfolio manager at Bosera Asset Management, is preparing to launch a vehicle on OP Investment Management's platform, and Hantak Investment Advisors—which operates a quantitative fund from its Beijing base—plans to open a comparable offering in Hong Kong. This geographic expansion reflects growing institutional demand for algorithm-driven strategies across the region.
Performance data supports the strategic rationale behind this shift. Through the end of September 2018, quant strategies investing in Asia generated a 3.4 percent return, beating the 1.8 percent global return for quant funds overall, according to data provider Eurekahedge Pte. More significantly, China equity hedge funds have declined 1.2 percent year-to-date, underperforming these algorithmic strategies by 4.6 percentage points—a sharp reversal from the three of four prior years when equity hedge funds dominated quantitative returns. Will Tan, managing director at Principle Partners Pte, attributes investor migration toward systematic trading to the search for diversification and lower correlation with traditional market exposures.
Family offices are beginning to institutionalize this shift. Junson Capital, a Hong Kong-based family office, is actively meeting with quantitative hedge fund managers in both the U.S. and Asia with plans to make its first allocation within approximately two years, according to Maggie Chen, head of portfolio management. She characterized the broader investor appetite for quants as part of a fundamental industry transition driven by yield-seeking behavior. The appeal lies partly in the theoretical emotional discipline of computer-driven strategies, which proponents argue are better positioned to protect capital and generate returns during periods of elevated market volatility.
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