Met Capital Management is set to apply its quantitative strategy to a whole new part of the world.
The firm will launch its Met Pacific Fund this quarter. Like the existing Met Europa Fund, the Asia-Pacific vehicle will use a systematic post-earnings momentum trading strategy covering developed markets in the region, including Australia, Hong Kong, Japan, Singapore and South Korea.
"We are not aware of any other hedge funds taking a similar approach to the developed Asian markets," Jonathan Gordon, Met founder, said in a statement. "We have completed an extensive eight-year back-testing, and more recently front-testing, which have produced very attractive risk-adjusted returns at 14.8% annualized return, 2.8 Sharpe ratio, 4.8 annualized volatility and a correlation of 0.1 to the MSCI Asia Pacific Index."
London-based Met hopes to garner between US$30 million and US$50 million for the fund at launch. Met Pacific will have a capacity of US$1 billion, twice that of the Europa fund, which currently manages US$40 million.
A number of Asian hedge funds closed their doors in 2011, but Gordon told FINalternatives this not only does not discourage Met from launching a fund focused on the region, it might prove an advantage:
"Significant numbers of Asian hedge funds did close their doors in 2011 due to poor returns," said Gordon in an e-mail. "[T]he Asian indexes lost more than any of the global, European, North American and Latin American indexes. In contrast, the seven-year back-testing for our Pacific strategy has produced highly favorable, risk-adjusted returns throughout a variety of market cycles. Indeed, the high levels of closure amongst what would have been our competitors means the capital that still wants and needs to flow into Asian markets and hedge funds should be easier to come by."
Gordon says the firm has "always wanted to expand into other geographic areas" and given "the similarly fragmented nature of the Asian-Pacific developed markets to those in Europe, it was natural that we chose to start testing our post-earnings momentum strategy here."
As for the timing of the launch, Gordon says they gave the Met Europa fund time to "consolidate and prove its robustness in a variety of market climates" and now, with five years' experience with the post-earnings momentum strategy in European markets and with all the necessary infrastructure in place, the firm is ready to launch its Asian fund.
The new fund will have a $250,000 minimum investment requirement. It will charge 2% for management and 20% for performance. The Cayman Islands-domiciled fund will feature Morgan Stanley as prime broker and custodian and BNY Mellon as administrator.