RESEARCH RANKINGS

and Qunar, the leading Chi- er it has a long-term vision for nese travel site, in which Hill- growth. house also holds a stake, has Hillhouse invests rarely, helped push the Beijing-based and usually at scale. Seventy firm to the top of Institutional percent of the companies in Investor’s ’s ninth annual its portfolio have remained Asia Fund 25 ranking unchanged since 2005, with of the largest Asia-based single- the top ten names accounting manager firms. (For for two thirds of total assets. more data visit institutionalin- Hillhouse was one of the vestorsalpha.com.) Hillhouse earliest investors in Tencent displaces Hong Kong–basedRecipient Holdings, a Hong Kong–listed Value Partners Group, which social networking and gaming had been No. 1 for four years company, which has a market running,to and becomes the first capitalization of $160 billion. mainland China firm to achieve “Just because there’s been a the top ranking. slowdown in China relative to THE ASIA HEDGE FUND 25 China is expected to grow the speed the country’s been 7.3 percent this year — its growing in the past ten years, TOP OF university’s investment office weakest pace since 1990. Hill- it’s wrong to assume there THE HILL while completing his MBA. house, however, has prospered aren’t investment opportuni- Hillhouse made an initial through a strategy that empha- ties there,” says Joseph Pacini, $255 million investment in sizes investment for the long Hong Kong–based head of the JD.com four years ago. By the term and a focus on alternative invest- time of the IPO, that stake had the limited number “Valuations ment strategy grown to almost $4 billion. of sectors in which group for Asia at Hillhouse’s assets under man- the firm, which has in China are U.S. asset man- WWHEN JD.COM, China’s agement have almost doubled only 30 investment lower than ager BlackRock. second-largest e-commerce over the past 12 months, professionals, feels in the U.S. “The Hillhouse retailer, completed a larger reaching $11 billion as of April it has special ex- or Europe. model is more than expected initial publicConfidential of- 1 and $14 billion at the end pertise: consumer, akin to a special- fering on Nasdaq at the end of of May thanks to the JD.com consumer Internet There’s a situations style. May, the listing, which valued IPO, from $7.5 billion at this and health care. significant They have a long the company at $26 billion, time last year. Hillhouse is stage- runway track record in in- did not just confirm investors’ Hillhouse founder Zhang agnostic, investing for further vesting in unique appetite for Chinese Internet rarely speaks to the press, in both public and opportunities in stocks; it also ensured the rise and the firm does not dis- private equity, and growth.” China, where even of Hillhouse Capital Manage- close data on year-to-date prefers to style it- Timothy Tse, amid poor growth ment to the top of the Asian performance. But since its self as a long-term Value Partners there are still sub- hedge fund universe. inception in 2005, Hillhouse equities investor. sectors growing at Hillhouse was founded in has generated average gross Its investment process is built 30 percent-plus a year.” 2005 by Zhang Lei with seed annualized returns of about around three issues: the qual- The past year has been capital from the endowment 40 percent. That, combined ity and defensibility of a target very much a tale of two Asian at Yale University; the 41-year- with the boost from the recent company’s model, the quality markets. After years of poor

old Zhang had interned at the Nasdaq listings of JD.com of its management and wheth- performance, Japanese and MUNDAY OLIVER

42 Summer 2014 / www.institutionalinvestorsalpha.com The 2014 Asia Hedge Fund 25

FIRM CAPITAL RANK ($ MILLIONS)

2014 2013* FIRM/FUND 2014 2013

1 2 Hillhouse Capital Mgmt (Beijing, China) $11,0001 $7,500 percent median 16 from 17 in 2013, with fewer 2 1 Value Partners (Central Hong Kong) 10,189 9,316 return, notes Hugh high-profile launches than in Abdullah, Morgan recent years and most of the 3 3 Sparx Group Co. (Tokyo, Japan) 6,6442 7,100 Stanley’s Hong growth focused on established 4 4 Dymon Asia Capital (Singapore) 3,800 2,950 Kong–based head regional titans. 5 5 Greenwoods Asset Mgmt Co. (Shanghai, China) 3,135 2,100 of capital intro- Value Partners slipped to duction for Asia. second place even though its 6 15 Tybourne Capital Mgmt (HK) (Central Hong Kong) 2,700 1,118 Throughout the capital base grew 9.4 percent, 3 7 – Turiya Capital Mgmt (Hong Kong) 2,428 – global hedge fund to $10.2 billion, from $9.3 bil- 8 10 Myriad Asset Mgmt (Central Hong Kong) 2,3754 1,675 industry, “stock- lion in 2013. The firm has a picking skill was hedge fund portfolio of as 9 6 Prime Capital Mgmt Co. (Hong Kong) 2,3025 2,096 most evident in the many as 120 positions dis- 10 7 PAG (Hong Kong) 2,100 2,000 Asia region,” he persed throughout Asia and 11 8 LIM Advisors (Central Hong Kong) 1,876 1,755 says. generated returns in the “high The first half of single to double digits” in 12 – Nezu Asia Capital Mgmt (Hong Kong) 1,550 – 2014, however, was 2013, according to CEO Timo- 13 9 ADM Capital (Asia Debt Mgmt Hong Kong) 1,400 1,700 a different story. In thy Tse, who remains bullish (Hong Kong) Japan the euphoria on China and Xi’s reform 14 12 Income Partners Asset Mgmt (HK) (Hong Kong) 1,307 1,225 that had greeted push. Earlier this year Value the announcement Partners launched a New 15 – Allard Partners (Hong Kong) 1,000 – of Prime Minister China Policy Fund to take 15 13 Argyle Street Mgmt (Hong Kong) 1,000 1,160 RecipientShinzo Abe’s re- advantage of the upswing that 17 20 Ward Ferry Mgmt (Hong Kong) 910 684 form plan cooled certain industries, such as as investors waited pharmaceuticals, cars and e- 18 18 Tower Investment Mgmt Co. (Tokyo, Japan) 863 962 to for the comple- commerce, are likely to see as 19 17 Ortus Capital Mgmt (Hong Kong) 857 1,000 tion of stimulus a result of both Beijing’s new 20 11 Azentus Capital Mgmt (Hong Kong) 8445 1,600 measures. And in growth model and the aging of China the appeal the Chinese population. 21 24 Quantedge Capital (Singapore) 795 612 of Xi’s reformism The firm’s largest position 22 16 AR Capital (Singapore) 765 1,070 lost some of its is in state-owned Chongqing

23 23 Double Haven Capital (Hong Kong) 715 620 gloss as concerns Chang’an Automobile Co. Tse resurfaced about notes that the carmaker trades 24 19 Pinpoint Asset Mgmt (Hong Kong) 633 685 the overheated at a forward price-earnings 25 21 Segantii Capital Mgmt (Hong Kong) 611 680 property market; ratio of 18.3. “There’s still problems in a huge potential in the market, 3 Unless otherwise noted, assets are as of April 1, Assets are as of February 25, 2014, from the lightly regulated even from a pure valuations 2014, and April 1, 2013. firm’s form ADV. *Ranks are as published in the 2013 Asia Hedge 4Assets are as of March 5, 2014, from the firm’s mutual fund indus- perspective,” Tse says. “Valua- Fund 25. form ADV. try; and questions tions in China are lower than 1Estimate of total firm assets, which consists of 5Assets are as of March 27, 2014, from the firm’s long-term equities and private investments. form ADV. about the govern- in the U.S. or Europe. There’s 2Assets are estimated as of March 31, 2014, ment’s ability to hit a significant runway for fur- converted from yen using the exchange rate on that date. Confidential its gross domestic ther growth.” product target. Last year Value Partners However, with launched its inaugural quali- Chinese equity markets re- managers benefited from the signs of economic stabiliza- fied foreign institutional in- bounded in 2013 on the back shifts; the Eurekahedge Asian tion in China and the launch vestor (QFII) fund, which of policy developments — Hedge Fund Index gained 15 of more stimulus in Japan in allows foreigners to invest namely, the announcement percent in 2013, compared June, markets have rallied: directly in mainland Chinese of Abenomics in Japan and with 6.5 percent for Singapore- The Shanghai Composite In- securities; the firm plans a efforts by the new administra- based Eurekahedge’s global dex gained 7.5 percent in July. second QFII fund later this tion of President Xi Jinping hedge fund index. (The Asian The firms in the ranking year. “The first fund was over- in China to rid the political index includes funds located managed $58.7 billion as of subscribed, and we closed it system of corruption and re- outside Asia that invest in April 1, a gain of almost 15 very quickly,” Tse says. But balance the economy toward the region.) Greater China percent in a year. The num- foreign investors’ interest in consumption and services. managers performed particu- ber of firms with more than Asia continues to wax and Asia-focused hedge fund larly well, generating a 22.6 $1 billion in assets dipped to wane. Interest from U.S. and

Summer 2014 / www.institutionalinvestorsalpha.com 43 RESEARCH RANKINGS

European investors in Asian funds. With conflicting and technology stocks and going limitations as it seeks to grow hedge funds has tended to be uncoordinated policy moves on property and infra- and support differentiated muted, says Morgan Stanley’s across the region, “instinctive- structure. The firm expects strategies at scale. “The major Abdullah. Most Western in - ly, Asia might look like a good policies to support Chinese eq- constraint on the further de- vestors have tended to be quite region for macro strategies, uities over the next 12 months, velopment of the hedge fund negative on China, assuming but in fact it’s been a very diffi- including reform of the hukou, industry in Asia is the simple a hard landing, he says. cult year for those funds,” says or household registration, sys- lack of liquidity in most mar- Foreign flows to Asian Allen Sing, an Asia-focused tem, which will allow for freer kets beyond large-cap Japa- hedge funds evaporated after portfolio manager at SAIL Ad- internal migration; the expan- nese and Chinese equities and the Federal Reserve’s taper an- visors. The rising interest rate sion of the QFII system; and foreign exchange,” says Harold nouncement and have yet to environment in the U.S. has the launch of Shanghai–Hong Yoon, CIO of SAIL Advisors. return in earnest, notes Candy disrupted flows into emerging- Kong Stock Connect, a mutual In asset classes such as local Cheung, a manager of Asian markets funds and reflects the market-access program. fixed income and Southeast portfolios at SAIL Advisors, consensus-driven nature of Despite the rise of main- Asian equities, “there’s just not a Hong Kong–based fund-of- macro trading in Asia. “Macro land China–based Hillhouse enough liquidity to support big hedge-funds firm. Whether managers, even relative-value and Greenwoods, Hong Kong fund activity.” they return will depend in managers, tend to line up on continues as Asia’s hedge In China the main con- large part on U.S. markets: very similar trades,” Sing says. fund capital, hosting 18 of the straints remain the inability to “We’re already starting to see “There’s very little dissension firms in the ranking, up from short stocks and restraints on some flows from developed or debate on how these market 15 last year. Tybourne Capital foreign investor participation markets back into Japan and prices should play out, which Management (HK), launched in the mainland securities Asia, and that might reflect means there’s not really much in July 2012 byRecipient Eashwar market and domestic investor a view of U.S. equity market opportunity for funds to dif- Krishnan, former Asia head at allocations to offshore hedge valuations,” she says. ferentiate themselves from U.S.–based Lone Pine Capital, funds. These stem mainly Investor outflows have each other.” rises to sixth place from 15th from the lack of convertibility been most severe in Japan, Two relatively new players last year, more than dou- of the renminbi, which inhib- Cheung adds. Despite the among Asia’s hedge fund elite bling its assets, to its the free flow of stimulus, “a lot of the econom- round out the top five: Dymon $2.7 billion. Several “Just capital. ic numbers are not picking up Asia Capital, the Singapore- Hong Kong–based because The most im- yet, and near term there’s still based macro fund founded firms debut: Turi- portant element a lot of caution in Japan on by Danny Yong, maintains ya Capital Man- there’s been Asian hedge fund the equities story,” she notes. its No. 4 spot, with its assets agement at No. 7, a slowdown development, how- In line with this short-term growing to $3.8 billion from with $2.4 billion in in China, ever, may simply caution, assets at Tokyo- $2.95 billion last year, while assets; Nezu Asia it’s wrong be time. “Most based Sparx Group Co. fell to Shanghai-based Greenwoods Capital Manage- global institutional $6.6 billion from $7.1 billion Asset Management Co. holds ment (No. 12, with to assume investors still al- last year, although this was on to fifth place. Greenwoods, $1.6 billion); and there aren’t locate to Asian still enough for the publicly which manages $3.1 billion, Allard Partners investment hedge funds as a traded firm to retain the No. 3 a 50 percent gain on its 2013 (No. 15, with opportuni- proxy for exposure spot. Apart from Sparx, the total, was founded by alumni $1 billion). ties there.” to the of Asian only other Tokyo-based firmConfidential of the People’s Bank of China BlackRock’s equities, broadly in the ranking is Tower Invest- and draws on its policy ex- Pacini sketches Joseph Pacini, speaking,” Pacini ment Management Co., whose pertise to combine local due the evolution of BlackRock says. “But hedge asset base also dropped. diligence with fundamental Asian hedge funds. funds aren’t there Cheung advises against read- research in pursuit of a long- Phase one was the arrival of to ride market swings; they’re ing too much into the dip: “If short equity strategy. global hedge fund players; there to take advantage of inef- Abe can pull this off, it will be The firm’s flagship Golden phase two was the launch ficiencies and increase consis- positive for the equities mar- China Fund, which has more of the first locally managed tency of returns.” The longer ket in the long term,” she says. than $1 billion in assets, grew firms. Today, he says, we’re on Asian hedge funds produce Long-short equity strategies 17.5 percent in 2013 and is the cusp of phase three: local consistent returns, “the greater continue their historical domi- up 11 percent year-to-date. traders who grew up in global investors’ understanding of nance of the Asia Hedge Fund Greenwoods has played Xi’s shops and established Asian the value of hedge fund expo- 25, with 2013 proving a dif- rebalancing act over the past incumbents setting up their sure in Asia will be,” he says. ficult year for credit, relative- year by being long consumer, own firms. “But that value and especially macro pharmaceuticals, Internet and Still, the Asian market faces will take time.”— Aaron Timms

44 Summer 2014 / www.institutionalinvestorsalpha.com 2014 Asia Hedge Fund 25

2014 Firm/Fund 2013 Firm/Fund Rank 2014 Rank 2013 Firm/Fund City State Country Capital Capital Net Return (%) 2013 NET RETURN 1Q2014 (%) Inception Date ($ millions) ($ millions)

1 2 Hillhouse Capital Mgmt Beijing China 11000 7500 ‐ 2 1 Value Partners Central Hong Kong 10189 9316 ‐ Value Partners High‐Dividend Stocks Fund 1775 1122 8.1 ‐2 9/2/2002 Value Partners Classic Fund 1252 1539 11.2 ‐7.2 4/1/1993 Value Partners China Greenchip Fund Ltd 419 138 16.5 ‐1.7 4/8/2002 China Convergence Fund 291 275 9.2 ‐8.1 7/14/2000 Value Partners Hedge Fund Ltd 273 267 19.2 ‐3.9 10/29/2004 Chinese Mainland Focus Fund 155 176 8.3 ‐9.6 11/27/2003 Value Partners Taiwan Fund 59 53 13.7 8.3 3/3/2008 3 3 Sparx Group Co. Tokyo Japan 6644 7100 ‐ Cosmo Asset Mgmt Co. Seoul South Korea 3060 3233 ‐ Sparx Asia Capital Mgmt Central Hong Kong 128 864 ‐ 4 4 Dymon Asia Capital Singapore 3800 2950 ‐ 5 5 Greenwoods Asset Mgmt Co. Shanghai China 3135 2100 ‐ Golden China Fund 962 860 17.46 1.09 7/1/2004 Greenwoods China Alpha Fund 409 127 24.57 0.59 4/1/2007 Golden China Plus Fund 254 94 21.77 ‐0.58 1/1/2010 Greenwoods A‐Share Opportunities Fund 18 ‐‐ ‐5.39 1/16/2014 6 15 Tybourne Capital Mgmt (HK) Central Hong Kong 2700 1118 ‐ 7 Turiya Capital Mgmt Hong Kong 2428 ‐‐ 8 10 Myriad Asset Mgmt Central Hong Kong 2375 1675 ‐ 9 6 Prime Capital Mgmt Co. Hong Kong 2302 2096 ‐ Dragon Billion China Master Fund 2059 1904 ‐‐ 10 7 PAG Hong Kong 2100 2000 ‐ Pacific Alliance Asia Opportunity Fund 2100 2000 ‐ 4.25 7/1/2002 11 8 LIM Advisors Central Hong Kong 1876 1755 ‐ LIM Asia Multi‐Strategy Fund 1320 1249 ‐‐ 1/1/1996 12 Nezu Asia Capital Mgmt Hong Kong 1550 ‐‐ Nezu Japan Fund Ltd 782 ‐ 20.9 3.9 2/1/2009 Nezu Asia Partners LP/Nezu Asia Fund Ltd 324 ‐ 55.5 ‐11.8 11/1/2000 Nezu Cyclicals Partners LP/Nezu Cyclicals Fund Ltd 168 ‐ 27 1.3 8/1/2005 Tiger Nezu Partners LP/Tiger Nezu Fund Ltd 152 ‐ 29.7 ‐4.5 2/1/2011 Nezu Master Fund LP/Nezu Master Strategy Feeder Ltd 132 ‐ 24.9 1.3 1/1/2009 Nezu KT Partners LP/Nezu KT Fund Ltd 59 ‐ 13.9 3.8 7/1/2012 Nezu Kuma Partners LP/Nezu Kuma Fund Ltd 41 ‐‐36.6 11.8 8/1/2008 Nezu TMT Partners LP/Nezu TMT Fund Ltd 8 ‐ 7 ‐1.6 11/1/2009 13 9 ADM Capital (Asia Debt Mgmt Hong Kong) Hong Kong 1400 1700 ‐ 14 12 Income Partners Asset Mgmt (HK) Hong Kong 1307 1225 ‐ IP All Seasons Asian Credit Fund 257 ‐ 2.24 0.83 2/1/2002 Income Partners Renminbi High Yield Bond Fund 206 ‐ 8.41 ‐0.89 7/27/2011 IP All Seasons Bond Fund 180 ‐‐1.63 0.55 9/1/2011 Income Partners Renminbi Investment Grade Fund 155 ‐ 6.18 ‐2.17 12/15/2010 IP Asian High Income Bond Fund 25 ‐ 0.85 0.78 11/30/2012 15 Allard Partners Hong Kong 1000 ‐‐ Allard Growth Fund 570 ‐‐2.4 1.9 5/1/1997 15 13 Argyle Street Mgmt Hong Kong 1000 1160 ‐ 17 20 Ward Ferry Mgmt Hong Kong 910 684 ‐ Long/Short Strategy 505 ‐‐ ‐ Long Only Strategy 405 ‐‐ ‐ 18 18 Tower Investment Mgmt Co. Tokyo Japan 863 962 Recipient‐ Tower K1 J‐Fund 276 331 42.6 ‐6.14 4/8/1999 19 17 Ortus Capital Mgmt Hong Kong 857 1000 ‐ Ortus Fund (Cayman) Ltd 105 ‐‐17.32 2.14 9/26/2003 20 11 Azentus Capital Mgmt Hong Kong 844 1600 ‐ 21 24 Quantedge Capital Singapore 795 612 ‐ Quantedge Global Fund 795 612 ‐‐ 10/1/2006 22 16 AR Capital Singapore 765to 1070 ‐ 23 23 Double Haven Capital Hong Kong 715 620 ‐ Double Haven Asia Absolute Bond Fund 275 165 7.19 1.74 12/1/2011 24 19 Pinpoint Asset Mgmt Hong Kong 633 685 ‐ Pinpoint China Fund 500 543 9.24 ‐2.01 6/3/2005 25 21 Segantii Capital Mgmt Hong Kong 611 680 ‐ Segantii Asia Pacific Equity Multi‐Strategy Fund 611 680 ‐1.68 ‐2.14 12/1/2007

Confidential