Charlie Chan's Splendid Asia macro hedge fund is living up to its name, with the former Credit Suisse trader putting his returns at 60 percent this year as bets on real estate investment trusts (REIT), bonds and currencies pay off.
It's on a different scale to his previous role at the Swiss bank, where Chan's 25-year-plus career culminated in him heading a team running portfolios of over $10 billion. For Splendid Asia, 53-year-old Chan is managing a relatively small $80 million, about half of which is his own money.
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The Singaporean is one of many traders leaving investment banks to set up hedge funds, as U.S. regulators seek to ban banks from trading their own money and weak markets have banks looking to trim operations.
He is also among the few who are doing particularly well. His Asia-focused fund, launched in August 2011, has already more than doubled from $37 million at launch.
"We took risk when nobody else wanted to," Chan told Reuters in Singapore last week. "REIT was a big major long and then regional equities. We have not sold anything at a loss."
One major winner was Cambridge Industrial Trust , a Singapore-listed REIT that has surged about 40 percent this year. He has also gained from trades in Singapore Airlines and Capitaland .
Chan favoured industrial REITs as they were easier to value and when he started buying them last year, some traded at 30-40 percent discount to book value. At one point, REITs made up more than half his portfolio. While he has booked some profits, REITs are still about a third of his portfolio.
Chan's success contrasts with the broader hedge fund industry. The Eurekahedge Asia index up 4 percent through September, and Asian macro hedge funds, which focus on major economic trends and events, have gained just 0.7 percent.
"He is what I think should be a true hedgie in Asia. He has seen the Asian markets in currencies evolve, has worked through different market cycles, and most importantly, is diligent with his on-the-ground research," said Aradhna Dayal, head of Asia for industry tracker HedgeFund Intelligence in Hong Kong.
"It is commendable to have such outlying returns. If you speak to global investors today, that is the kind of niche manager they are looking for," said Dayal, who said Chan had a strong track record as a proprietary trader at Credit Suisse.
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Over an Indian lunch where topics ranged from noodle soup to internet speeds and politics but always returned to his trades, Chan told Reuters he made money every year but two during his time at Credit Suisse, averaging double-digit returns.
Chan said bets on Singapore government bonds, Indian and Indonesian stocks have paid off, without disclosing details of individual trades. He also made money going long on currencies such as Singapore dollar and trading the Indonesian rupiah.
His winning trades were boosted by two-times leverage, enhancing the overall returns for the hedge fund to 60 percent.
He has taken some money off the table expecting markets to quieten down ahead into the end of 2012, but he still likes government bonds, with Singapore his favorite due to the fiscal surplus and large foreign exchange reserves.
"So if they have to spend to get out of trouble, they will spend," he said.
Chan runs his firm with former Credit Suisse colleagues Lam Hoi Leong and Albert Neo. He is not looking to raise billions of dollars to manage and has not actively marketed the fund.
"Do I really want to have that higher profile? If people want to come in and invest that's fine," Chan, said.
"They know where to find me. I think money will come."
He expects about another $20 million of investment over the next two months, and said his experienced team could manage $400-500 million without losing too much upside.
"I equate it to the Mexican runners going to the Olympics at sea level. They were used to running at 14,000 feet so when you go down to sea level you should have no problem, without the need for performance-enhancing drugs."
(Reporting by Nishant Kumar; Editing by Denny Thomas and John Mair)