RMF-seeded Korean hedge fund shuts down

Rhee Capital, a Korea-focused equity long/short hedge fund launched in April 2003, has closed its operations and returned money to investors at the end of March 2005. The fund's founder and portfolio manager, Namuh Rhee has now joined Merrill Lynch equity research as first vice president and head of Korean country research.

Rhee Capital's offshore Pine Tree fund was seeded in October 2003 by RMF, a subsidiary of hedge fund giant, Man Investments. Rhee's Pine Tree fund received substantial capital from RMF through its Hedge Fund Ventures programme which seeks to partner up with future hedge fund stars at the early stage by providing them with seed capital in return for an equity stake or revenue share in the underlying management company.

Rhee says that his fund returned all its money to investors at the end of the first quarter of 2005. The Pine Tree fund had $30 million under management. Rhee Capital had an additional $30 million in separate fund raised from local Korean sub investors.

Rhee says that the reason for the fund's closure was personal preference, rather than a forced closure due to large losses or operational mishaps. Rhee points out that the fund's performance was in the second to third quartile of Asian hedge funds and in the first three months of 2005 was up around 7%.

"Running a hedge fund was a great experience, but I realized I didn't enjoy the job. Managing people, products and clients suits me better than managing risk and volatility, and I look forward to returning to research with Merrill Lynch," he says.

Prior to setting up his hedge fund, Rhee established and ran Samsung Securities research group in Korea.

An RMF spokesperson said that the firm was unable to comment on the fund's closure for confidentiality reasons. However, the closure of Rhee Capital does raise questions about the assertion on RMF's website that "partnering up with RMF is a seal of confidence for other investors."

At present, RMF's hedge fund ventures programme has made 13 start-up investments. Rhee's Korean fund was one of four Asian hedge fund investments the group has made. Hawaii-based Japan event driven fund, Stone Harbor, Singapore-based Asian macro fund, Azura and San Francisco-based GSB Capital's Phoenix Japan fund, have been the other Asian funds to receive capital under this scheme.

Rhee says that most traders and analysts from his team at Rhee Capital are already in new roles with Korean and foreign brokerage houses. Key trader Jay Jung has joined an upcoming Singapore-based hedge fund start up Oojoo Capital.

In his new role as head of Korean research at Merrill, Rhee will be based in Korea and report to Merrill's head of Asia Pacific research Hun Soo Kim. Rhee will also be assistant head of research for Japan and will collaborate with the regional research team to research sectors such as IT and autos.