Up 19%, Singapore $ 3 billion fund Quantedge eases lockdowns

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(Bloomberg) – Singapore-based hedge fund Quantedge Capital Pte plans to ease some restrictions on client redemptions, giving investors a chance to make a profit after recording 18.6% gains in the top five month.

In a model similar to that offered by Millennium Management last year, clients who sign up for a planned new share class will be able to withdraw 5% per quarter, easing previous restrictions that barred most investors for three or five years, according to Chief Executive Director Suhaimi Zainul-Abidin. Assets under management topped $ 3 billion for the first time, as the resurgence of commodities and equity markets generated gains this year, he said in an interview.

“With a reasonable payback option, investors can withdraw profits over time and obtain liquidity, but continue to invest for the long term,” he said. “I hope this means investors will stay longer because it will be more useful to them.”

Hedge fund investors around the world are increasingly looking to place their money in Asia to take advantage of the region’s economic growth. This includes funds with relatively high degrees of risk and volatility; Quantedge, which relies on mathematical models and algorithms to make trading decisions, suffered its worst month in history in March 2020 when yields plunged 29%, but eventually recovered to be net positive for the ‘year. The performance between January and April places it among the six best-performing Asian quantitative funds, according to data from Eurekahedge.

Quantedge was founded by former reinsurance pricing actuary Leow Kah Shin and Chua Choong Tze, who before hedge funds taught a portfolio management course at Singapore Management University. Both remain active within the firm as joint research managers. The company said it has 70 employees and invests in instruments, including stock index futures, government bonds and commodities, as well as currencies.

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Hedge funds wonder how to prevent investors from withdrawing their funds at inconvenient times, which in turn can force a hedge fund to sell its assets when prices are low. More than 100 funds authorized in Singapore have seen single-day redemptions exceeding 5% of assets under management since April, according to the Monetary Authority of Singapore.

At Quantedge, the majority of its roughly 600 investors are locked into three- or five-year fixed-term share classes that were launched in 2018, contrary to the industry standard. Even with lockdowns, hedge funds can face waves of redemptions at the expiration of fixed terms.

The additional new share class is expected to launch around October of this year, Suhaimi said.

Much of the gain over the past year was initially driven by fixed income, followed by equities as markets rallied in the second half of 2020, he added.

“In 2021, fixed income was the drag, although our models reduced those positions,” he said. “Equities are doing well and commodities are doing great for us this year.”

(Adds details on buybacks. In an earlier version, the company corrected its workforce and the fact that its earnings were driven by fixed income)

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