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Snow Lake to liquidate Asia fund after executives quit

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Snow Lake Capital, a Hong Kong-based hedge fund that bought up Chinese stocks during the wind down of Archegos, is liquidating one of its two main funds after the resignation of both of its portfolio managers.

Paul Kim and Yusuke Saito, who both previously managed money at Louis Bacon’s Moore Capital Management, have quit the Asian investment manager after helping it launch its pan-Asia strategy in 2018.

Their departures mean Snow Lake, which manages around $2bn of assets, will stop investing in Japan and Korea, two of its three key Asia markets. Instead it will retrench to its original focus of investing in China, according to a person close to the fund.

Snow Lake’s China fund is down about 20 per cent this year so far, the person said. However it was up 16 per cent in October and 7 per cent so far this month. Investors in the Asia fund that is being liquidated have been offered the ability to transfer to the China fund, the person added.

The performance of the Asia fund is not yet known, however Citigroup’s wealth investment unit told clients this week — prior to the resignations — that it had placed the fund on a “watch” list in October, according to a memo seen by the Financial Times.

Two people who have worked closely with the fund said that one of the triggers for the collapse appeared to have been its large holdings in MGM China — a stock that has lost just over 63 per cent of its value since its year high in mid-March.

According to the people, in recent months the fund had been increasingly desperate to offload some of its stake in the casino company, which trades only relatively small volumes a day. Snow Lake attempted to exert a form of activist pressure on MGM Resorts International to sell 20 per cent of its China business in January, as its fortunes have been battered by Covid-19 and travel restrictions to Macau that have hit the sector hard. 

Snow Lake was launched in 2009 by Sean Ma with backing from Zhang Lei, the founder of Hillhouse Capital, one of China’s most powerful technology private equity investors.

Ma, who had previously worked at the Ziff Brothers family office, quickly built a name for being among a small number of China-focused hedge funds with a multi-year track record of gains.

Snow Lake became well known in international hedge fund circles in 2019 after it was believed to have produced the anonymous short seller report that exposed fake sales at Luckin Coffee, the Chinese coffee chain. Snow Lake, whose name comes from a 1979 snowstorm in Hangzhou’s West Lake, has declined to comment on whether it authored the report.

Several people close to Snow Lake said it had suffered this year after buying up positions in some Chinese technology stocks during the liquidation of the holdings of Archegos Capital in April.

The New York family office run by Bill Hwang was forced to offload as much as $50bn of positions in companies including education tech group GSX and streaming service iQIYI after it failed to meet margin calls by its lenders.

Chinese Internet and education stocks were among those whose value has been crushed by a series of regulatory actions in Beijing this year.

Snow Lake’s China fund was down 26 per cent in 2021 until the end of July — and around 7 per cent for the month of July — when strict new measures from Chinese regulators wiped as much as $1tn from the value of the country’s largest firms.

Snow Lake declined to comment.

*This article has been amended to correct erroneous information on the funds provided by the company

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