Bloomberg Published on Fri, Jun 04, 2021 

Singapore-based hedge fund Quantedge Capital plans to ease some restrictions on client redemptions, giving investors a chance to draw profits after recording gains of 18.6% in the first five months.

In a model similar to one offered by Millennium Management last year, clients signing up to a new planned share class will be able to withdraw 5% per quarter, relaxing previous restrictions that kept most investors locked up for three or five years, according to CEO Suhaimi Zainul-Abidin. Assets under management have surpassed US$3 billion ($3.98 billion) for the first time as resurgent commodity and equity markets delivered gains this year, he said in an interview.

“With a reasonable redemption option, investors can take out profits over time and get some liquidity but continue to invest for the long-term,” he said. “Hopefully it means investors will stay on longer because this will be of more use to them.”

Hedge fund investors around the world increasingly look to place their money in Asia to profit from the region’s economic growth. That includes funds with relatively high degrees of risk and volatility; Quantedge, which relies on mathematical models and algorithms to make trading decisions, suffered its worst month in history in March 2020 when returns plunged 29%, but eventually recovered to be net positive for the year. The performance between January and April puts it among the top six performing Asian quant funds, according to Eurekahedge data.

Quantedge was founded by former reinsurance pricing actuary Leow Kah Shin and Chua Choong Tze, who prior to the hedge fund taught a course in portfolio management at Singapore Management University. Both remain active at the firm as co-heads of research. The firm said it has 70 staff and invests in instruments including futures in equity indexes, government bonds and commodities, along with foreign exchange.

Hedge funds are wrestling with how to prevent investors from withdrawing their funds at inopportune times, which in turn can force a hedge fund to sell its assets when prices are low. At Quantedge, the majority of its roughly 600 investors are locked into three- or five-year fixed-term share classes that were launched in 2018, in contrast with the industry norm. Even with lockups, hedge funds can face waves of redemptions when the fixed terms expire.

The new additional share class is expected to launch around October this year, Suhaimi said.

Much of the gain over the past year was initially driven by fixed-income, followed by equities as the markets recovered in the latter half of 2020, he added.

“In 2021, fixed income has been the drag even though our models have downsized those positions,” he said. “Equities have been doing well and commodities have been doing superbly for us this year.”