Hedge fund Keystone grows to US$2.6 billion, a standout for Asia
TWO-YEAR-OLD Keystone Investors has seen assets swell above US$2.6 billion, said a person with knowledge of the matter, a rarity among pandemic-era Asia hedge fund startups.
The Singapore-based firm has decided to stop accepting fresh money, having received enough investor commitments to take assets to US$3 billion, its targeted cap for now, the person added, asking not to be identified discussing confidential information. Chief investment officer Liu Xuan declined to comment.
Keystone’s ability to attract funds stands out against a sea of China-focused hedge funds that have been reeling from the country’s crackdowns on tech, real estate and education platforms. Capital raising by independent Asia managers has also been hit by pandemic-era travel restrictions, mounting geopolitical tensions and China’s economic slowdown.
While Keystone trades around Asia themes, the firm touts its expertise on China. It has not recorded an annual loss since its inception and returned 20.2 per cent in the first half, five times that of the average peer focused on Asian stocks, according to a Eurekahedge gauge.
Liu’s fundraising success comes even as global investors gravitate towards pod shops that employ teams of traders using different hedge fund strategies, instead of cherry-picking managers themselves. The trend led to 55 such multi-manager firms nearly tripling assets since 2017, while the rest of the global industry stagnated, Goldman Sachs Group prime brokers wrote last September.
Keystone was spun off from Schonfeld Strategic Advisors in 2022, with its backing. Before striking out on his own, Liu had also honed his skills at several other global multi-manager firms, including Point72 Asset Management, Millennium Management and Folger Hill Asset Management, rising from analyst to portfolio manager.
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Keystone started trading in April 2022 with nearly US$800 million of investor commitments. It has periodically stopped taking in new money before. The firm most recently sought fresh cash in late 2023, collecting US$700 million from clients this year on top of nearly US$350 million in investment returns.
Asia and China-focused hedge funds have had to find ways to cope with a slowdown and policy shifts in the world’s second-largest economy. Greater China has remained Keystone’s biggest market, although the region’s share of its gross exposure – the combined value of bullish and bearish wagers – has swung from 30 per cent to 70 per cent over the years, said the person.
Founders of independent hedge funds have had to deal with the headaches of capital raising and paying expenses while warding off competition for talent from larger multi-manager rivals.
Crescent Asset Management Asia’s Jai Rajpal, Navik Capital (Singapore)’s Ayan Sen and Torq Capital Management’s Avinash Abraham are among regional hedge fund entrepreneurs who gave up running their own businesses to join or return to pod shops. BLOOMBERG
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