Singapore hedge fund Asia Genesis Asset Management has shuttered its macro fund following a “significant and unprecedented” 18.8% drawdown this month because its bets on the Hong Kong and Japanese markets went very wrong.
According to Chief Investment Officer Chua Soon Hock, the decision to shut down the four-year-old Asia Genesis Macro Fund was “seriously thought through” and “the logical prudent way forward before incurring further losses”.
Chua, who founded the firm in 1999, acknowledged the fund made “big mistakes” with its bets on the Hong Kong and Japanese stock markets. Hong Kong stocks fell and Japanese stocks rose, the polar opposite of what he had expected.
He says he doesn’t understand the “inconsistency of China policymakers not fighting against deflation, leading to the continued loss of market confidence and prolonged bear market”.
“I underestimated the Nikkei’s straight-line upward movement and Nikkei exchange-traded funds being bought at a 20% premium over net value of China exchanges, and how long this will continue,” he writes in a letter to investors on January 23.
“We made another big mistake in trying to pick the bottom in the Hang Seng and Hang Seng Tech indices. I am astounded by the incredible Nikkei-Hang Seng spread that priced Chinese versus Japanese stocks at the same value as in 1991, despite current economic realities,” he says.
According to Chua, the tough trading of the last three months and a “disastrous” January proved that his past experience is working against him, and he has lost his confidence as a trader.
“I have lost my knowledge, trading and psychological edge. “The principle of risk-reward for both the short-term and long-term has turned its head,” he writes.
Chua held senior positions at several firms and the Monetary Authority of Singapore before setting up Asia Genesis.
The most recent data on the company’s website shows that the macro fund’s net return in the first ten months of 2023 was 7.76%. Its net return since inception in May 2020 to October 2023 was 33.32%.
Chua says the company will be following up investors regarding fund redemptions.
Chua and spokespersons for Asia Genesis did not immediately respond to questions from Asia Asset Management.
