HONG KONG, Jan 29 (Reuters) - An Asia hedge fund run by former Nomura Holdings Inc trader Benjamin Fuchs returned 31.6 percent last year as bets on credit markets paid off, making it one of the best performing Asian funds led by a high-profile trader.
The returns by Fuchs, who led the Global Opportunities Group at Nomura as one of the region's top paid proprietary desk traders, contrast with single-digit gains for most large or well-known hedge funds in Asia. A few ended the year losing more than 10 percent.
BFAM Partners, which manages $400 million, made most of the returns towards the end of last year, gaining about 25 percent in the last quarter, a copy of a letter to investors obtained by Reuters showed.
The fund, which was launched only in June last year, returned nearly 9 percent in December alone.
"Sticking with our core thesis that low global rates, low default rates and reduced macro headline risk will continue to drive credit spreads tighter and provide a constructive equity environment, paid well," the firm wrote to clients this month.
His success is rare at a time when a number of traders, who moved out as banks comply with regulations seeking to ban them from trading with their money, are struggling with their funds.
Among well-known Asia funds, Fuchs appears to have been only outdone by former Credit Suisse trader Charlie Chan's $105 million Splendid Asia macro hedge fund, which gained 63 percent last year betting on real estate investment trusts, bonds and currencies.
It is also a shot in the arm for Asia's $127 billion hedge fund industry, which has seen large funds underperform while those with good returns have languished as they are often too small to attract investors.
Asia-focused hedge funds returned about 10 percent in 2012 as measured by the Eurekahedge Asian index, underperforming an 18.6 percent gain for MSCI's broadest index of Asia-Pacific shares outside Japan.
Fuchs had a strong track record at Nomura where the team he led produced a 48 percent return in 2009 and 20 percent gain in 2010. Returns in 2011, when peers in the Eurekahedge Asia index lost an average 8.4 percent, was about 1 percent.
The firm remains optimistic about credit markets.
"New issuance will begin in earnest during January and has the potential to re-price credit better as demand persists in a low interest rate environment." BFAM wrote to clients.
An e-mail and a telephone call to BFAM chief operating officer James Singh seeking further comment about the fund's performance went unanswered.
BFAM's Asian Opportunities Fund trades credit, equity-linked instruments such as convertible bonds and volatility products like currencies and equity derivatives.
Its performance in December was driven mainly by two factors - demand for lower-rated credits and a strong rally in bonds issued by Chinese solar equipment maker LDK Solar Co Ltd , according to the newsletter.
LDK Solar bonds shot higher after bondholders consented to covenant changes that gives the company more flexibility to pursue strategies in liquidity management and restructuring.
The fund also benefited as yield hungry investors bought lower rated papers, with bonds from B-rated companies like Yuzhou Properties Co Ltd and China SCE Property Holdings Ltd in demand.
High-yield Chinese property bonds gave a return of 45 percent in 2012 on a weighted basis, according to Deutsche Bank. The JP Morgan Asia Credit Index for high-yield bonds rose 20.4 percent last year, compared to just 11.3 percent for investment grade debt.
Hedge funds' credit strategies range from direct lending to companies to trading fixed income securities. Other Asia funds with such strategies that did well included Double Haven Asia Absolute Bond Fund, which was up 20.6 percent, while the Prudence Enhanced Income hedge fund gained 16.4 percent.