Company buybacks and bond redemptions provided event-driven trading opportunities.

Asia hedge funds rebounded in 2024, with many posting double-digit gains as China stocks recovered, Japan’s equity rally hit new heights and some managers reached further afield for profitable trades.

Equity funds managed by Aspex Management (HK), Panview Capital and CloudAlpha Capital Management were among those that returned more than 35 per cent in 2024, often powered by artificial intelligence (AI) related and other technology bets, including those outside the region. Among macro funds that trade across equity, fixed income, currency and commodity markets, funds of Ocean Arete were up at least in the high teens.

That marked the first year since 2020 in which Asian hedge funds kept pace with the global average, according to data from Eurekahedge. It ended three years of widespread losses fuelled by the Covid pandemic, geopolitical tensions and China’s industry crackdowns.

While still hovering at half of its February 2021 peak, the MSCI China Index rebounded nearly 16 per cent last year on hopes that government stimulus will rejuvenate the ailing economy. Japan’s Topix jumped another 18 per cent in 2024, bolstered by the AI frenzy and corporate governance reforms. India’s Sensex gained 8.2 per cent.

With assets topping US$9 billion by June, Hermes Li’s Aspex is a giant in the Asian industry. It returned nearly 38 per cent for the year, according to sources with knowledge of the matter. Trades in technology, industrial, consumer and financials in various countries contributed, one of them added, declining to be more specific.

Panview’s 41 per cent return marked the best year yet for the firm led by former Goldman Sachs proprietary trader Ryan Thall, according to its latest investor letter. The fund, which began trading in November 2019, is on a six-year winning streak with assets at around US$1.5 billion, said a source with knowledge of the matter, who asked not to be identified discussing private information.

While the bulk of Panview’s investments remained in Greater China and Japan at the end of December, the biggest bullish position and a large part of the year’s gain came from AppLovin. The firm has bet on the US digital marketing company expanding market share and broadening its client base, helped by higher returns on advertising spending from its machine-learning model, according to the letter and the source.

Research into Chinese e-commerce companies’ advertising spending led Panview to put on the trade at the start of the year. Shares of AppLovin jumped more than 700 per cent last year. It remains its largest bullish bet, the source said.

RAYS Capital Partners’ Asian Technology Absolute Return Fund returned 80 per cent, going off the beaten track to find lesser-known beneficiaries from the AI boom, said Partner Nicholas Chung.

One of its most profitable trades was Credo Technology Group Holding, the US maker of cables that’s riding high on data centre upgrades to raise transmission speed. Taiwan’s Asian Vital Components has been tapping into increasing adoption of liquid cooling solutions for AI servers, Chung added. Lithium battery module maker Advanced Energy Solution Holding surged on data centre demand for battery backup. RAYS also counted Nvidia and ARM Holdings among its top five trades in 2024, he said.

CloudAlpha Tech Fund returned 77 per cent, driven by investments in generative AI infrastructure and application companies, particularly in the US, said a source with knowledge of the matter. Global semiconductor and data centre infrastructure bets powered the nearly 56 per cent surge of Singularity Tech Fund, a newer CloudAlpha pool.

Sentiment in Asia’s high-yield US dollar bond market continued to improve last year, rebounding from a slump in 2021 and 2022 when investors were hit hard by a wave of Chinese property developers going into financial distress and defaulting. The roughly US$530 million L&R Asia Credit Alpha Fund returned 25 per cent from active trading of credit in various industries across the region, including China, India, Indonesia, Japan, Australia, Mongolia and Hong Kong, the firm confirmed.

Barun Agarwal’s Factorial Fund surged nearly 18 per cent, continuing a winning streak since its inception in 2012, said a source with knowledge of the matter. Among its top trades was a long-time credit investment in India’s Vedanta Resources. Previously weighed down by investor pessimism, Vedanta’s shares and bonds outperformed last year on an earnings recovery and efforts to reduce leverage.

Share price swings of companies including South Korea’s Posco Holdings, Taiwan’s Hon Hai Precision Industry and China’s Sunny Optical Technology Group made their convertible bonds profitable trades, as did Hong Kong’s flagship carrier Cathay Pacific Airways’ convertible bond buyback. Improving sentiment, buybacks and redemptions lifted the credit prices of Chinese companies, such as drugmakers Pharmaron Beijing and Luye Pharma Group, equipment leasing firm Far East Horizon and Postal Savings Bank of China, the source said.

Tribeca Asia Credit Fund was another beneficiary of improving credit spreads and rating upgrades as the likes of Vedanta and Japan’s Rakuten Group regained access to the bond market, said its manager John Stover. Company buybacks and bond redemptions provided event-driven trading opportunities. New bond issuances rebounded with higher coupons, while a shift in negotiation power to bondholders from issuers led to better deal terms.

Stover expects new bond sales in the region to continue to recover. US dollar rates are trending below Asia-Pacific outside Japan and China again, prompting firms to redeem their bonds at higher than market prices and replace them with longer-maturity borrowing in the greenback, instead of local currencies. His investments will be biased towards India and much of South-east Asia, which Stover said stand to benefit from the second Donald Trump presidency at the expense of China, South Korea and Japan.