Folger Hill Hedge Fund Teams Up With Schonfeld for Asia Push

(Bloomberg) -- Folger Hill Asset Management, started by former SAC Capital Advisors' Chief Operating Officer Sol Kumin, has attracted money from Steven Schonfeld's investment firm to expand its fledgling Asia business.

Investors including Schonfeld Strategic Advisors and Leucadia National Corp. have pledged $500 million to Folger Hill's regional business in Asia, according to an e-mailed statement. Folger Hill and Schonfeld's firm will work together to identify investment strategies for the Asia unit under a long-term strategic partnership deal, the companies said in the statement. 

Folger Hill has lined up support as the $2.9 trillion global hedge-fund industry faces investor criticism and redemptions over high fees and lackluster returns. The industry lost assets for four consecutive quarters through September, a phenomenon not seen since June 2009, according to data from Hedge Fund Research Inc. The number of hedge funds started sank to a 16-year low in the first nine months of this year, according to Singapore-based data provider Eurekahedge.

“We view both the Asian market as well as the European market as talent rich,” Schonfeld's Chief Investment Officer Ryan Tolkin said in an interview. "The diversification benefits from continuing to expand geographically are encouraging to us."

About 80 percent of Schonfeld's investments, excluding the Folger Hill commitment, are in the U.S., with the international portion expected to increase over time, Tolkin said.

Asia Expansion

Folger Hill, with offices in New York and Boston, in March started an Asia unit in Hong Kong led by Angus Wai, a former regional head of SAC and its successor company Point72 Asset Management. It now has 11 employees, including seven on the investment side, according to the statement. Wai recruited former colleagues, including Nobutaka Ariki, Jinchul Lee and Hillman Wong as Folger Hill's first batch of Hong Kong-based fund managers.

"We see tremendous opportunity in Asia and are excited to work with Schonfeld and our existing partner Leucadia as we expand our presence in the region,” Kumin, Folger Hill's chief executive officer, said in the statement.

Folger Hill is not alone in adding people in a region whose diverse, fragmented and less efficient markets have the potential to generate fatter profits for talented traders. Point72, created after SAC pleaded guilty in 2013 to securities fraud and returned outside capital, has gone on its biggest ever hiring spree in Asia this year. Dmitry Balaysny's Balyasny Asset Management has added a Singapore office and employees across the region.

Going the other way, Hutchin Hill Capital, the $3.4 billion New York-based hedge fund led by Neil Chriss, decided to shut its less than two-year-old Hong Kong office by year-end, which housed its "modestly profitable" team investing in Asian securities going through events such as mergers and acquisitions.

Assets committed toward the Asia unit boosted Folger Hill's global assets to about $1.3 billion, said a person with knowledge of the matter, who asked not to be identified as the information is private. Kumin founded Folger Hill in 2015. Its hedge fund returned more than 2 percent in October, narrowing this year's loss to under 6 percent, said the person.

Schonfeld's Fortune

Under their deal with Folger Hill, Schonfeld's firm will provide capital to help finance the Asian unit's operations and investments, according to the statement. Leucadia, an existing Folger Hill partner, will assist in matters including talent recruitment.

Steven Schonfeld amassed his fortune by seizing on short-term market moves. His New York-based investment firm, until last year a family office, manages investments with a gross market value of more than $13 billion globally. It provides investment, operational capital and technology support to nearly 50 investment teams, according to the statement. They include computer-driven and tactical traders as well as fundamental stock pickers, it added.

"Our business in Asia right now is primarily based on quantitative trading strategies," Andrew Fishman, Schonfeld's president, said in a telephone interview. "We saw this as an opportunity to expand our reach into Asia on the fundamental equity strategy side of our business."

Among the teams supported by Schonfeld is Quantbot Technologies, run by a nuclear physicist who helped establish electronic-trading platforms at Morgan Stanley and Merrill Lynch & Co. Quantbot won a license from Hong Kong's securities regulator in May to start a unit.

To contact the reporter on this story: Bei Hu in Hong Kong at bhu5@bloomberg.net. To contact the editors responsible for this story: Sree Vidya Bhaktavatsalam at sbhaktavatsa@bloomberg.net, Robert Olsen