Lim Advisors puts China multi-strat fund on ice

Lim Advisors has put its China Absolute Return Fund in a holding pattern, according to sources, closing the strategy to external investors recently following a -26% loss last year.

Launched in 2006, the China-focused strategy is understood to be continuing trades, running about $38 million in assets thought to be largely, or entirely, the Hong Kong-based firm’s own money.

Lim Advisors declined to comment for this article.

Since inception to end-2011 the China fund has returned about 80%, with particularly buoyant returns amid the bull-run years of 2006-07, and the roller-coaster market ride of 2009.

The multi-strategy hedge fund – with relative value, credit and event-driven strategies at its core – is one of a few vehicles that was roiled by extreme volatility in China’s stock markets last year.

Galaxy Asset Management closed its China Absolute Return Ucits hedge fund in May, while Pinpoint – which runs a range of China-focused funds – liquidated its Rising Commodity Fund in January, with almost all of the liquidation proceeds reinvested in the firm’s multi-strategy fund, which has commodity futures investments.

The Eurekahedge Greater China Hedge Fund Index was down -13.17% in 2011 – one of the worst performing years over the past decade, surpassed only by 2008, when it dropped -26.85%.

Drawn by the mainland’s growth story, investors have piled into Greater China-focused funds, which now account for 13.5% of the $125.5 billion in Asian hedge fund assets, from 4.4% in 2006, according to a recent report by data provider Eurekahedge.

However, continued market volatility is making it challenging for managers to generate returns. In the year to end-September, the Eurekahedge Greater China Hedge Fund Index was up 3.86%, lagging the Eurekahedge Asia ex-Japan Hedge Fund Index, which returned 6.08% over the same period.