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To say that Value Partners had a good year would be an understatement. Since April 2009 the Hong Kong–based hedge fund firm’s assets under management have almost doubled, to $5.7 billion. And to make up for a disastrous 2008, when many of its funds plunged more than 40 percent, Value Partners posted returns as high as 117 percent last year.
After three years at No. 2, Value Partners takes over the No. 1 spot in the Asia Hedge Fund 25, Institutional Investor’s ranking of the largest Asia-based single-­manager hedge fund firms. But its dramatic growth in 2009 had little to do with investor inflows.

“We had minimal net subscription last year, but fund performance contributed a lot to the increasing assets under management,” says deputy CIO Louis So.

For that performance, publicly traded Value Partners owes only so much to China’s recent bull market. In 2009 the firm’s funds far outstripped the Hang Seng index, whose 52 percent rise doubled that of the Standard & Poor’s 500 index. Value Partners’ flagship, the $812 million Classic Fund, gained 82.9 percent, while its $127 million Chinese Mainland Focus Fund gained 86 percent.

Like roughly half of the firms in the Asia Hedge Fund 25, Value Partners relies on a long-short equity strategy. It takes what So calls a contrarian, bottom-up approach to picking Asian stocks, with a focus on Greater China. Last year alone the firm’s 23-­member team made 2,500 company ­visits.

Value Partners’ funds tend to be long-­biased. But as of this spring, it had hedged most of its offerings by selling index futures. It can also hedge up to 10 percent of individual stocks in its portfolio, So says.

With the Chinese economy cooling — the Shanghai Stock Exchange composite index was down more than 20 percent this year through May — Value Partners has boosted cash levels. Through May the Classic Fund and the Chinese Mainland Focus Fund were flat for the year. But So says Value Partners is on the lookout for bargains: “For a long-term investor like us, we are seeing some good buying opportunities.”

Assetwise, Asian hedge funds are rebuilding after a year of devastating losses and redemptions. As of April 1 the firms in the Asia Hedge Fund 25 managed $36.1 billion in assets, up 19.9 percent from a year earlier. In the first quarter of this year, however, Asian-­focused hedge funds saw $700 million in net redemptions, according to Chicago-based Hedge Fund Research. During the same period the $1.67 trillion global hedge fund industry took in $13.7 billion.

Like their counterparts in Europe and North America, Asian hedge funds are consolidating, says Ted Lee, a Hong Kong–based managing director for New York’s Blackstone Alternative Asset Management, which oversees $28.6 billion in funds of hedge funds. Sure enough, several small firms on last year’s list have dropped off, while most of the bigger players have grown or held their ground.

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