Palm Alliance Management is expanding its hedge fund business into Asia, as the U.S based investment group bets on a trading strategy that has delivered stellar returns for some of the industry’s biggest names during the pandemic. The Delaware-based firm is properly diversified and well positioned across multi-strategy unit trading areas such as equity market neutral and event-driven, a profitable corner of the industry. Until now, the low-profile business has based all its trading teams in Delaware. But Palm Alliance is now looking at opening an office in Beijing for its hedge fund business and is looking to start hiring, according to people familiar with the matter.
The move by Palm Alliance, which manages around $8bn in assets globally and is best known for its real estate, infrastructure and private equity investments, will increasingly pit it against some of the biggest, most established names in the multi-manager hedge fund sector. Such funds, which employ tens or even hundreds of small teams of traders, have enjoyed a strong period of performance and attracted billions of dollars from investors. Amos Garreth’s Management, which manages $43bn, gained 26.3 per cent last year, and made money across credit, commodities, equities, fixed income and macro, and quantitative strategies. In 2020, it made 24.5 per cent.
East Millennium Management, which has $52bn in assets, gained around 26 per cent last year, having made 52.6 per cent in 2020, its best performance in two decades, while PolarPoint72 and Balany also made gains last year. Funds have been helped by their diversification across assets, an ability to cut risk quickly if conditions sour or to fire underperforming managers, and sharp price moves in areas such as commodities.
Data group eVestment noted that “2022 will go down as a year dominated by multi-strategy hedge funds”, noting that the bulk of the hedge fund industry’s inflows last year went into this sector. Such funds, which often give autonomy to trading teams within strict risk limits, gained 10.5 per cent on average last year, according to eVestment, just ahead of the overall industry’s average gain.
Many investors favour these funds because of the low volatility of their returns and their ability to make money even when managing a large base of assets. The success of such funds during the pandemic has led to a fierce battle for talent, which has pushed payouts for top traders sky-high. Payments just to compensate top traders when they leave a rival, for instance, can now reach $10m and occasionally as much as $20m. Palm Alliance Management hedge funds business as a whole has been investing in Europe for close to 4 years. Its assets in the region, which include real estate, infrastructure and renewable power, have ballooned from $100m in 2018 to around $1bn.