Huttenlocher mulls prime brokerage choices for hedge fund

Carl Huttenlocher, the ex-Asia head of Highbridge Capital Management, is on the final lap towards his hedge fund launch in Hong Kong.

With Morgan Stanley veteran Scott Gaynor joining as chief operating officer, the firm is now mulling its next big decision: selecting the prime brokerages that will serve the upcoming fund, which is expected to reach $1 billion in assets.

According to sources, Goldman Sachs, Deutsche Bank and Credit Suisse were provisionally chosen as the three prime brokers, but with the recent addition of Gaynor, the race is not yet over.

Gaynor resigned from Morgan Stanley this month after 24 years of service, most recently as chief operating officer for Asia. He is leaving on good terms from the bank, which is now a fourth contender for a prime brokerage mandate.

Huttenlocher, who made a surprise departure in March from US-based Highbridge – the alternative asset management arm of JP Morgan – is expected to draw about $1 billion in allocations.

Much of the capital is expected to come from investors in a $1.4 billion Asia Opportunities Fund that Huttenlocher had managed for Highbridge, as they want to keep their money with him, according to sources.

Highbridge is said to be in the process of winding up the Asia fund. A non-compete agreement, however, means that Huttenlocher will initially start trading – possibly this year – using his own money, with Asia Opportunities clients expected to re-invest with him in 2012.

The upcoming fund is viewed within the industry as an Asian billion-dollar vehicle that will be in the same league as the Azentus fund, founded by ex-Goldman Sachs proprietary trader Morgan Sze. It started trading in April with $1 billion in capital and is said to be in line for a further $800 million in allocations.

Azentus reportedly returned 0.3% in April, although one fund of hedge fund manager noted that it was “early days” and the fund could do well in the coming months.