Macquarie hedge fund up 10 pct

By Nishant Kumar
HONG KONG | Thu Jan 13, 2011 4:51am EST
HONG KONG (Reuters) - Macquarie Group Ltd's (MQG.AX) market-neutral
long/short Asia hedge fund gained 10.3 percent and nearly tripled
assets to $640 million (406 million pounds) last year, its fund
manager said, while many hedge funds in the region were starved for

By comparison, the Eurekahedge Asia Long/Short equities index was up
7.3 percent, while the MSCI Asia Pacific Index in local currency
returned about 4 percent.

Andrew Alexander, who co-manages the Macquarie Asian Alpha Fund, said
the fund could have a soft close when assets reach close to $1
billion but had the capacity for about $1.25 billion.

"The pipeline is strong. We are seeing a number of British and U.S.
institutions that are interested in the product," Alexander told
Reuters in a telephone interview late on Wednesday.

Steadier returns with low volatility had lured institutional
investors who consider the fund a good way to achieve their asset
liability management objectives, said the veteran fund manager, whose
previous employers include hedge funds such as LIM Advisors and
Pacific Group.

He said Macquarie's global marketing presence and liquidity track
record during the financial crisis, when the fund honoured
redemptions worth about $500 million in 32 days, also helped in 2010
when flows into Asian hedge funds started to revive.

"I think investors remember them," he said, adding that lower
competition also helped the fund corner assets looking for
market-neutral hedge funds in Asia.

There are hundreds of Asian long/short hedge funds, but Alexander
estimated that only a handful offered market-neutral strategy and
institutional-grade services to attract insurance or pension funds,
which have become choosier since the financial crisis.

Market-neutral strategy is aimed at profiting from both rising and
falling prices to exploit market inefficiencies and targets the fund
beta, or market risk, to be equal to zero.

The Macquarie Asian Alpha Fund has returned 11 percent annually since
its launch in 2005 with volatility of about 5 percent. By comparison,
the MSCI Asia Pacific Index in local currency has given 0.7 percent
annually with volatility of more than 22 percent.

Alexander said the fund had no country, sector or currency biases and
applied quantitative strategies to filter out stocks and avoid active
risk in volatile Asian markets.

"People do want to believe in the Asian growth story and they do want
to believe that people can get them rich quickly. The stats are
however the markets have not delivered over reasonably long-term
period," he said.

The fund screens nearly 5,500 Asian stocks and places bets on
hundreds of them. It aims to generate returns through individual
stock selection by going marginally long or short on them.
Source: Reuters.Com