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[SINGAPORE] Dymon Asia Capital (Singapore)'s US$3.5 billion global macro hedge fund, which lost money on Switzerland's surprise decision to let the franc trade freely, has recouped some of the losses, President Jay Luo said.
Dymon pledged to return some of the performance fees earned in 2014 to investors in the Dymon Asia Macro Fund if it fails to recoup the 10.5 per cent January loss within two years, chief investment officer Danny Yong wrote in a letter to investors last week. The fund has returned 7 per cent since then, Mr Luo said in an interview, declining to identify trades that drove the gains.
Investors as well as Dymon employees have added US$230 million of new capital to the fund in February and March, Mr Luo said in an interview in Hong Kong.
The franc soared as much as 41 per cent against the euro on Jan 15 after the Swiss National Bank removed a three-year-old exchange-rate cap, prompting hundreds of millions of dollars in losses at hedge funds and European banks and pushing some currency-trading firms into insolvency.
January marked the first monthly loss of more than 4 per cent in five years for the Dymon Asia Macro Fund, according to Mr Yong's letter. Dymon introduced risk-management measures in late 2008 to curb monthly declines below that threshold after the collapse of Lehman Brothers Holdings triggered an almost 9 per cent loss in 2008, the fund's first year, according to newsletters to investors.
"Despite the fact that this breach was triggered by a highly unusual 15 per cent gap move in Swiss franc, I am no less embarrassed by our January results," Mr Yong wrote in the letter, before announcing the special fee rebate arrangement. "I personally feel that 'talk is cheap.'"
Investors have in recent years demanded that hedge funds more closely align their interests with those of investors. Some managers have agreed to measures such as putting aside part of the performance fees earned in a profitable year so that they can be returned to investors when there's a subsequent loss.
The Dymon Asia Macro Fund gained an estimated 1 per cent in February and 6 per cent in March through March 11, Mr Luo said. It returned 19 per cent last year after fees.
Dymon, based in Singapore, reopened the fund to new money for the first time in more than two years at the end of 2014, he added.
The US$300 million Dymon Asia Currency Value Fund returned 35.5 per cent this year through March 6, according to an update sent to investors. The smaller fund makes medium-term investment in Dymon's best ideas in Asian and Group of 10 currencies, according to an October newsletter seen by Bloomberg News.
Dymon, which manages US$4.6 billion as a firm, has only marketed the currency fund to existing investors of its macro fund, said Mr Luo.