Ex-Millennium's Johansen Opens Asia Quant Fund in Volatility Bet

(Bloomberg) -- Kennie Atle Johansen, a former manager with Izzy Englander's Millennium Management, is launching a quant hedge fund trading Asia stocks in anticipation that market volatility will increase this year.

The Disciplina Fund is expected to start this month with $110 million and will be managed from Hong Kong, Johansen said in an email. It will trade on Swiss-Asia Financial Services Pte.'s hedge fund platform and bet on rising and falling stocks on main Asian markets, he said.

Johansen is starting the fund as market turbulence is expected to increase as central banks withdraw unprecedented monetary stimulus that's underpinned an eight-year equity bull market. The Chicago Board Options Exchange Volatility Index in November fell to the lowest on record and Paul Tudor Jones has warned low volatility is becoming “dangerous” after lulling investors into a false sense of complacency.

“I believe the markets will get increasingly volatile, from an artificially low level, as central banks globally will pull away from aggressive monetary stimuli towards a more normalized level of interest rates and balance sheets,” Johansen said. “This process should provide stock-picking strategies with more opportunities, especially on the short side.”

New hedge fund launches in Asia are picking up after the number of openings fell to a record low in the first three quarters of 2017. Graham Capital Management alumnus Brian Quartarolo plans to start an Asia-Pacific focused macro fund early this year, while Millennium Management is backing long-time employee Ayan Sen's fund with an initial $400 million investment.

Quant Gains

Funds using mathematical, or quant, models returned 11.4 percent last year through November, according to Hedge Fund Research Inc. That's better than the 7.6 percent gain by the HFR Fund Weighted Composite Index, but lags the MSCI Asia Pacific Index's 26 percent rally during that same period and the MSCI World Index's 19 percent gain.

“Quant equity funds are in fashion with buzz words such as big data, machine learning and artificial intelligence,” said Chauwei Yak, co-founder of Gao Capital, a hedge fund research firm in Singapore. “There is overcrowding in factors and managers are buying the same data from the same vendors.”

Before joining Swiss Asia, Johansen was a portfolio manager at Millennium in Hong Kong focusing on systematic long-short equity strategies. Prior to that, he worked as director at Societe Generale SA in Hong Kong.

To contact the reporter on this story: Klaus Wille in Singapore at kwille@bloomberg.net.

To contact the editors responsible for this story: Sree Vidya Bhaktavatsalam at sbhaktavatsa@bloomberg.net, Peter Vercoe

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