HONG KONG Goldman Sachs-linked Capula Investment Management is expanding its $13 billion business into Hong Kong, according to sources, becoming the latest major investor to jump into the region where hedge fund players are a small but growing part of the market.
While thousands of hedge funds across the globe manage nearly $2 trillion in assets, relatively few have so far established a large presence in Asia, despite the region's rapid economic growth in the last five years.
That is changing fast, with GLG Partners, Soros Fund Management and Paulson & Co among the funds that have set up shop in Hong Kong as a major centre for growth, especially given its proximity to China.
The sources, who had direct knowledge of the matter, said Capula would open an office in Hong Kong, which would be fully operational at some point this year.
"It's yet another large, successful international fund setting up in the region as evidence of the increasing need to be in Asia to find opportunities and the availability of local talent," said Mark Wightman, global head of alternatives strategy at technology firm SunGard.
"It also highlights the evolution of the Asian hedge fund market from being historically an equity long/short play, as we now see growth in multi-strat, macro and fixed income strategies," he added.
London-based Capula, which also has offices in Greenwich and Tokyo, declined to comment.
The hedge fund accepted $200 million from sovereign wealth fund China Investment Corp CIC.UL in 2009, and was selected by the State of Wisconsin Investment Board in the United States for its first-ever allocation to hedge funds last year.
Antony Hung, a Bank of America Merrill Lynch veteran who worked for nearly two decades in the fixed income division at the Wall Street bank, will head the Hong Kong office, which will have traders focused on Asia, the sources said.
Hung was Merrill Lynch's head of wealth management in Asia-Pacific before retiring in 2010. He steered the business through the financial crisis in 2008 and the transition after Merrill Lynch was taken over by Bank of America in early 2009.
ROUGH YEAR FOR SECTOR
Capula, in which Goldman's (GS.N) Petershill fund, which takes stakes in hedge funds, bought a nearly 20 percent stake in 2008, is currently in the licensing phase in Hong Kong.
The hedge fund manages fixed income trading strategies along with a tail-risk hedge product, which aims to protect investors from rare and extreme events in financial markets.
Capula was founded in 2005 by Yan Huo, an electrical engineer who moved into securities trading after earning his doctorate from Princeton University, and Masao Asai, a former executive at UFJ International.
The sources did not disclose how much assets will be managed out of Hong Kong or if Capula will launch new funds.
The move adds to a revival in the hedge fund industry in Asia after a rough 2011 when funds lost about 8 percent, leaving the industry fighting a tough battle to retain clients and spelling troubles for start-ups, prime brokers and service providers who had pinned hopes on a potential expansion.
Well-known funds, such as the $300 million Thaddeus Capital fund and Boyer Allan Investment Management, which once managed $1.8 billion, have shut with the number of closures in 2011 surging past launches for the first time since 2008.
However, 2012 has the makings of a better year for the industry, with Asia-focused hedge funds tracked by Eurekahedge clocking average gains of nearly 6 percent year to date and with some high-profile hedge fund launches set for the months ahead.
Major start-ups include one by former Nomura Holdings Inc (8604.T) trader Benjamin Fuchs, who will launch a multi-strategy hedge fund on June 1 with backing from Japan's largest investment bank.
(Additional reporting by Laurence Fletcher in LONDON; Editing by Michael Flaherty, Chris Lewis and Muralikumar Anantharaman)