Hong Kong, and other Asian capitals, will probably begin to house more hedge funds - Wikipedia
Asia is in the process of establishing itself as the global engine of growth. It is only natural, then, that a few Asia-based hedge funds made their way onto Forbes’ new list on hedgie compensation. Based in Hong Kong and Singapore, Joe Zhou and Danny Yong both focused on global macro strategies to capitalize on currency cycles and market trends, delivering solid returns for their investors as their funds continue to grow in size. Check out the slideshow below for the list of the 40 highest paid hedge fund managers of 2011.
In a hard year for investors, delivering returns wasn’t easy. The global economy grew 3.8% according to the IMF while advanced economic output grew a paltry 1.6%. Asia, on the other hand, was booming. While growth slowed, Chinese output increased 9.2% while India expanded 7.4%. ASEAN-5, which consists of Indonesia, Malaysia, Philippines, Thailand, and Vietnam, experienced a growth rate of 4.8%.
On the back of this growth, a few Asian hedge fund managers rose through the ranks, outshining many of their peers as returns grew. Among the year’s best performers were Danny Yong, founder and CIO of Singapore-based Dymon Asia Capital.
Yong saw his fund grow assets under management past the $2 billion mark and delivered net returns north of 20%. According to our calculations, Danny took home a cool $40 million combining management and performance fees, along with his own cash appreciation within the fund. Dymon's macro strategies were so effective that Yong was forced to hard close its fund to new capital, according to Asian Investor.
Another rising star in the hedge fund world was Dr. Joe Zhou, head of Ortus Capital Management. Dr. Zhou has taken Ortus’ assets past the $3 billion mark, returning about 5% net of fees to investors. Zhou comes from an academic background, despite having worked at both Lehman Brothers and Bear Sterns, and applies quantitative models to “take advantage of various FX cycles and variations.” Based in Hong Kong, Zhou also took home about $40 million in 2011.
The rise of both managers speaks to the power of global macro strategies in Asia. While many U.S. managers have capitalized on equities, going long the likes of Apple and Caterpillar, or shorting stocks like First Solar, Netflix, or Green Mountain Coffee, Zhou and Yong focused on currencies.
Zhou explained it in a piece written for Eureka Hedge saying “currencies can be a distinct source of alpha.” From the piece:
An exchange rate is a reflection of the relative strengths and the relative tightness of monetary policies of two countries. The sources of currency returns by nature are different from equities or bonds. A well-constructed currency portfolio tends to have a low correlation with equity or bond markets. It also tends to have a low correlation with other hedge fund strategies, such as equity long/short. A well-managed currency program can be a distinct source of alpha. Ortus Fund’s correlation with major asset classes since its inception in September 2003 has been low.
As Asian growth continues to lead the global economy, more and more capital will find its way to the East. Zhou and Yong are probably just the first of a generation of Asia-based hedge fund managers that will increasingly begin to fill our lists. Keep an eye out for them.
