New Silk Road ends its 16-year journey: BT looks at the challenges Singapore hedge funds face
What is a hedge fund, and what are some top hedge funds in Singapore?
[SINGAPORE] Investment management firm New Silk Road announced earlier in July that it will be closing its doors after a 16-year run in Asia.
Based in Singapore, it is one of the longest-running hedge funds in the city-state. It is the investment manager of the Asia Landmark Fund, which has onshore and offshore investment structures for US and international investors through a Cayman limited partner (LP) and Cayman offshore feeder fund.
So what caused New Silk Road to shutter, and who are its founders? The Business Times explains, and takes a look at what hedge funds are, and the industry in Singapore.
The origins of New Silk Road, and who its founders are
Founded in 2009, the company was started by Raymond Goh, the former head of Asian equities at GIC, and Hoong Yik Luen, the former head of Hong Kong-China equity products at Deutsche Bank.
New Silk Road in its early stages was considered a pioneer in the finance scene of Singapore. For context, the Republic’s hedge fund market managed S$59 billion in the pre-2010s; as at December 2024, the market stood at S$327 billion, based on data from the Monetary Authority of Singapore (MAS).
Goh and Hoong’s hedge fund is known to be among the earliest in Singapore to invest long-short equities across Asia. Its strength lay in being of of the early foreign investors in China, through an on‑the‑ground Shanghai team.
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Notably, the company received Qualified Foreign Institutional Investor access in 2012 to invest in Chinese yuan-denominated mainland Chinese stocks and bonds. At the time, fewer than 200 firms were granted this licence from the China Securities Regulatory Commission.
This move attracted a large pool of US institutional investors seeking Asia-centric exposure for their portfolios, drawn to New Silk Road’s Asia Landmark Fund and China Fund.
New Silk Road’s growth trajectory headed north from its start. In 2021, it had nearly US$2 billion in assets under management.
Goh and Hoong are among the first pioneers in setting up an Asia-focused hedge fund. Goh was previously with GIC for 18 years, according to his LinkedIn profile.
Hoong graduated from the National University of Singapore (NUS) with an electrical engineering degree in 1990. Following that, he was in public and private market equity research and investment with various global firms, according to the NUS website. After his last role as the head of Hong Kong-China equity products at Deutsche Bank in 2008, he co-founded New Silk Road Investment with Goh.
Both are crossing 60 years old, Hoong told Bloomberg.
China investment slump
Hoong told Bloomberg that the main reason for the shuttering of the fund is that they are opting for a slower pace.
The fund struggled when China markets went into a slump, with China’s widespread regulatory crackdown across sectors such as technology and real estate sending investors flocking to US markets.
In 2022, China’s benchmark CSI 300 Index tumbled by 22 per cent, with the decline extending into 2023. This hit China investors and shuttered many funds. China’s bear market persisted for a couple of years, but rebounded this year.
Both the Asia Landmark Fund and the China Fund recorded negative returns for three of the past five years, with slumps of 28 per cent and 19 per cent, respectively, in 2022, Bloomberg reported, citing sources.
These effects were clearly felt by New Silk Road, which scaled back on staff levels in Shanghai, and closed a recently launched South-east Asia fund, said Hoong. The number of staff affected remains undisclosed.
The closure of Hoong and Goh’s hedge fund was announced on Jul 22. All remaining capital will be returned to investors and the vehicles will be shuttered, amid a high level of investor redemptions and weak returns.
Observers BT spoke to suggested that once a certain level of investor redemptions is hit, it is difficult for hedge funds to build back their capital.
New Silk Road is not the only one to have gone through a rocky decline in Asia in the recent few years. Others have as well, though for a mix of other reasons.
Singapore hedge fund Asia Genesis, for example, in January 2024 faced a significant level of drawdowns, in light of its long positions in Hong Kong and China collapsing due to China’s market rout; its short bets on the Nikkei were crushed as Japan stocks surged to a 34-year high that month.
The Asia Genesis Macro fund underwent drawdowns of 18.8 per cent in the first few weeks of January 2024, when its long-short play went wrong. The fund closed all its positions by Jan 18, and returned money to its investors after its losses.
“It has been a difficult few years for funds that invested a large portion of assets under management (AUM) in China,” said Teh Hooi Ling, portfolio manager of Inclusif Value Fund in an interview with BT. “With Hong Kong and China markets underperforming the US markets by a significant margin – who wants to allocate money to any managers when simply buying the SPDR S&P 500 ETF allows one to handily beat most, if not all, Asian hedge fund managers?”
What is a hedge fund, and what are some top hedge funds in Singapore?
Hedge funds are private funds actively managed by portfolio managers, and are typically considered higher risk and require a higher investment to start. They can operate on a number of different strategies, such as long-short, global macro and multi-strategy.
They can also invest in a variety of assets including stocks, fixed income, real estate, currencies and futures.
Hedge funds were popular as early as the 1990s, due to a number of factors such as the rise of institutional investors and the use of trading strategies like derivatives. By 2008, the worldwide hedge fund industry held an estimated US$1.9 trillion in AUM.
Asian hedge funds managed to eke out decent positive returns between 1998 to 2003 (the period of the Asian financial crisis and Sars), even when the broader market tanked.
“During the bull run from 2003 to 2007, these funds also rode tailwinds as the majority of them were doing long-short equity strategies with a long bias,” noted Inclusif Value Fund’s Teh.
Within the Asia-Pacific, Singapore continues to be an attractive centre for alternative and hedge fund managers to set up their regional investment teams, said MAS last year.
The regulator noted that more global hedge fund managers were setting up offices here. There were more than 250 of such managers as at the end of 2023.
Some top hedge fund managers in Singapore include Quantedge Capital and Dymon Asia Capital. Dymon Asia manages over US$3.5 billion, and Quantedge, more than US$4 billion. Dymon said its fund posted an 8 per cent return through May this year, topping other funds. Last year, it was up 17 per cent.
Another long-running Singapore hedge fund manager is APS Capital Management, with its founder Wong Kok Hoi also considered an early pioneer in the scene. He was previously with GIC and MAS.
The Singapore hedge fund market totalled S$327 billion as at December, according to MAS data.
Hedge fund versus private equity
Certain observers have noted that hedge funds have lost their shine in recent times however, particularly when compared to private equity. This is mainly due to high management and performance fees by the funds, which can erode returns substantially regardless of performance, and increased competition in the space over the years.
“Returns of hedge funds are lower than the past, partly due to poor market sentiment as well as reduced market inefficiencies,” Teh said.
While private equity also faces issues such as slower company exits and a backlog of unsold companies, they can seem to be mitigated by higher potential returns and lower volatility which investors now prefer.
“However, we should note that the returns reported by hedge funds and private equity are not directly comparable. Hedge funds typically report time-weighted annualised returns while private equity funds use IRR (internal rate of return), a money-weighted metric that is highly sensitive to the timing of capital calls and distributions,” explained Teh.
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