Pivotal Investments has closed its hedge fund – which was among the best-performing Asian multi-strategy funds last year – and is returning capital to investors.
A re-launch of the strategy is planned under the aegis of ChinaRock Capital Management, a China-focused alternatives manager.
Run out of Hong Kong, the Pivotal Investments Fund was launched in mid-2010 by Brian Yeh and Michael Yi Sun, who had both previously worked at US hedge fund Evolution Capital Management.
While Pivotal had strong returns of about 44% in 2011, it has not performed as well this year, note sources. The gains from last year had largely come from a couple of heavily weighted portfolio positions, they add, leaving some investors uncomfortable with the concentration risk.
They add that the fund failed to raise a groundswell of capital from investors and is thought to have had less than $100 million in AUM at the time of closure. Pivotal had launched with about $20 million from investors that included Evolution Capital and ultra-high-net-worth families.
Last week Yeh joined ChinaRock in Hong Kong with plans to re-launch the strategy under the name Vantage Opportunities Fund. He declined to comment to AsianInvestor. There is uncertainty over what Sun’s next move will be, as it is understood he will not be joining Yeh at ChinaRock.
ChinaRock was launched in 2006 by former traders from US hedge fund giant Farallon Capital Management, which provided investment capital and back-office support. ChinaRock runs venture capital and hedge fund strategies, which includes a Greater China-focused long/short equity fund.
The closure of Pivotal epitomises the difficult operating environment for Asian hedge funds. The higher cost to run a hedge fund in the post-crisis era means that most strategies need to scale up assets quickly to cover their operational costs.
Fund managers with less than $100 million in AUM face a “tough slog” in raising capital, says one industry veteran. The region’s smaller funds are “scratching and clawing” to get allocations, as large investors prefer to write cheques to those with at least $100 million in assets, he notes.
Having a globally recognised name is also no guarantee of fundraising success, as demonstrated by the recent closures of Asian hedge funds by Lazard and Henderson Global Investors, which each had less than $100 million in AUM.