Top Billion-Dollar Quant Hedge Fund Plans Investor Lockups
World's Top Billion-Dollar Quant Plans Multiyear Client Lockups
(Bloomberg) -- Quantedge Global Fund, the world’s best-performing quantitative hedge fund last year with more than $1 billion in assets, is taking the rare step of asking clients to lock in their money for several years even as such arrangements have fallen out of favor with investors.
The $1.7 billion Singapore-based fund, which advanced 38 percent last year, plans to introduce two new share classes in February and shareholders will have to switch from monthly liquidity to fixed terms of three or five years, according to a newsletter seen by Bloomberg.
While the fund is keeping its performance fee unchanged at 20 percent, it’s lowering the 2 percent annual management fee to 1.8 percent for the three-year share class and to 1.5 percent for the one requiring a five-year lockup, it said in the newsletter.
“For investors who are willing to commit to lower liquidity, it would be fairer to allow them the option to do so in return for lower fees,” Quantedge said in the newsletter. “Having longer-term capital will also provide more stability to the fund and its investors.”
Quantedge confirmed the contents of the newsletter.
Introducing a lock-up period is unusual in the current environment, amid an investor backlash against mediocre industry returns, high fees and other terms clients consider inequitable. Plans discussed by billionaire Steve Cohen as he resumes taking investor money include lockup periods of one to three years, which made some potential clients wary, Bloomberg reported in December.
“Quantedge’s decision is a rare move,” said Chauwei Yak of asset manager GAO Capital, which runs the hedge fund research platform QuantFlix. “You can only do that with a strong track record and a loyal investor base.”
Still, some hedge funds can pull off such attempts, especially if they’ve posted market-beating returns or can offer other concessions. Quantedge is offering a 12-month management fee waiver to investors who switch to the three-year share class before July, and a 24-month fee waiver for the five-year share class.
The Quantedge Global Fund, whose assets rose to $1.7 billion in December from $3 million in 2006, uses mathematical models to bet on macroeconomic themes. It was the top performer in 2017 among billion-dollar-plus quant hedge funds, and also beat the 3.6 percent average return posted by global macro funds, according to data provider Eurekahedge Pte. The Systematic Diversified Index that tracks quantitative funds rose by an average 2.3 percent, data from Hedge Fund Research Inc. show.
Quantedge also announced a management reshuffle. Founders Leow Kah Shin and Chua Choong Tze, formerly co-chief executive officers, will now both head the fund’s research team. Suhaimi Zainul-Abidin, who previously was director and general counsel at the fund, has been named CEO. Quantedge also appointed Lee Yin Chao, Ng Say Liang and Chang Yi Chian as co-chief investment officers.
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