Myriad, Dymon Hedge Funds to return about 20pc in 2014

Alibaba, China yuan stocks and currency trades brought it home for Asian hedge funds in 2014.

Trades related to the linkage of the Shanghai and Hong Kong stock exchanges drove a 35 percent gain in the $942 million Segantii Asia-Pacific Equity Multi-Strategy Fund, according to an investor newsletter. The $3.5 billion Dymon Asia Macro Fund returned an estimated 19 percent on currency trades including the yuan and yen, said a person with knowledge of the matter.

The more than $3.5 billion Myriad Opportunities Master Fund was up 20 percent last year, gaining from a preinitial public offering investment in Alibaba Group Holding Ltd. (BABA), said two people with knowledge of the matter who asked not to be identified as the information is private.

Asian managers beat global peers for the third-straight year in 2014. The funds outperformed in a year when the Standard & Poor 500 Index (SPX) advanced 11 percent, while the MSCI Asia-Pacific Index retreated 2.5 percent and stock gauges in Japan, Hong Kong and Korea trailed the U.S. benchmark. "Currencies proved to be a fertile ground for macro and foreign-exchange managers whose experience of local market peculiarities and their ability to trade around monetary policy decisions paid off," said Stephane Pizzo, managing partner of Singapore-based Lotus Peak Capital, which invests in hedge funds. "The second great trade for Asian funds in 2014 was the strong rally in Greater China equity markets."

The Eurekahedge Asian Hedge Fund Index rose 6.7 percent in 2014, outstripping the 4.5 percent gain in the Singapore-based data provider's global gauge. China's benchmark Shanghai Composite Index (SHCOMP) surged 53 percent in 2014 in its best year since 2009. China said in April that it would allow international asset managers to buy yuan-denominated shares listed in Shanghai, known as A shares, without a so-called qualified foreign institutional investor quota for the first time. The reform, which started in November, was one of China's biggest steps to open up its capital market and widen access to its stock market.

Speculation that the government will take steps to boost the world's second-biggest economy also contributed to a 34 percent Shanghai A-share rally in the last two months of the year. Financial stocks including banks and brokerages led the gains.

Greenwoods Asset Management's $1.4 billion Golden China Fund returned 30 percent in 2014, according to Joseph Zeng, a partner and Hong Kong office head. Springs China Opportunities Fund, with about $280 million of assets, was up about 38 percent, said Jenny Tian, a Hong Kongbased managing partner. Pinpoint China Fund, which oversees $538 million, returned 17 percent in 2014, according to an investor newsletter.

The three funds gained by starting in late 2013 to increase holdings in large, high-quality A-share stocks, including insurers and real estate companies, convinced they were undervalued relative to international peers, and smaller domestic stocks favored by individuals, said Zeng, Tian and the Pinpoint newsletter. The Golden China Fund, lead-managed by George Jiang, also bought blue-chip consumer and utilities stocks listed in China, Zeng said. "They were trading at crisis valuation in early 2014," Zeng said. Those stocks surged after China cut interest rates on Nov. 21 and yields on real estate trust products drove domestic investors back to the stock market, he added.

China's CSI 300 Index (SHSZ300), tracking the largest companies listed in Shanghai and Shenzhen, advanced 44 percent in the final quarter, compared with the 37 percent surge of the Shanghai Composite Index.

The $749 million Pine River China Fund returned 30 percent for the year, another beneficiary of the ShanghaiHong Kong stock-exchange linkage and A-share rally. Hedge-fund performances usually lag benchmarks in market rallies after trading costs and fees. Myriad, led by former Highbridge Capital Management Asia head Carl Huttenlocher, booked a 7.5 percent return in September when Alibaba completed its $25 billion U.S. IPO, the world's largest on record, said a person with knowledge of the matter. Sam Guinness, its Hong Kong-based investor relations officer, declined to comment as the information is private.

Myriad invested $100 million in a 2012 Alibaba private convertible preferred share sale, the Wall Street Journal reported in September. The value of its Alibaba holdings swelled to $609 million at the end of September. Alibaba's American depositary receipts jumped 53 percent from the IPO to the end of December.