The relatively small size of its hedge fund industry -- assets under management of $47.3 billion pale in comparison to $1.6 trillion in North America and $462.7 billion in Europe -- may also mean investors in the more petite funds are more comfortable with risk versus their peers, often venerable pension and sovereign wealth funds that demand lower volatility even if that means less profit.
“There’s a lot of money coming in -- money that’s willing to take more risks,” said Johan Sulaeman, who teaches finance and investing at the NUS Business School in Singapore.
Chong’s Vanda is a poster child of this phenomenon.
His storied rivals would have teams of portfolio managers, squads of analysts and a small army of interns. Chong, 46, trades from a plain desk in his home office with a laptop and an extra monitor. While some quants have supercomputers, his model is built on an Excel spreadsheet that crunches data supplied by a Bloomberg terminal.
“If you spend too much money in terms of infrastructure and rent, it’ll eat into your returns,” Chong said in an interview in a nearby cafe. “I only have two eyes, right, so how many screens can I look at?”
Even though his fund’s annualized volatility is a whopping 72% -- it returned 260% in 2017 only to plunge 49% the following year -- early backers have remained loyal. Vanda’s annualized returns are 39% and Chong now manages $222 million. He’s been taking steps to reduce volatility, to 40%, while still aiming to generate growth in excess of 30% a year.
It’s not just minnows that are taking risks.
Singapore’s Quantedge Capital Pte, whose 63.1% return this year makes it one of the world’s best quant funds, manages over $2.1 billion and has almost 70 staff and more than 600 clients. It targets annualized volatility of about 30%, far higher than what many larger funds with institutional investors are willing to stomach.
School of Thought
The second thesis is that the relative illiquidity of Singapore’s stock exchange and lack of natural resources have combined with its high-pressure education system to produce smart, data-driven graduates who think globally. Almost half the country’s hedge funds have a global geographic mandate.