September 6, 2011 / 3:02 AM / 8 years ago

UPDATE 1-Monsoon Capital banks on quant to regrow hedge fund assets

* Asia-Pacific quant-driven fund up 17.5 pct in August

* Founder aims for half the firm’s assets in quant funds

* Firm manages $400 mln, including $70 mln in quant funds

* Assets fell to $150 mln in 2009 from $1.6 bln in 2008 (Adds details, quote)

By Nishant Kumar

HONG KONG, Sept 6 (Reuters) - Monsoon Capital, which managed $1.6 billion before the financial crisis triggered major redemptions, is banking on quant-driven strategies to regain lost ground following strong performance in its Asia-Pacific hedge fund, founder Gautam Prakash said.

Quant fund managers follow a set of mathematical techniques to evaluate risk, pricing and timing in financial markets, unlike those following fundamental and technical analysis that largely depend on subjective calls.

The Monsoon Asia Pacific Systematic Program, a $15 million managed futures fund using quant techniques to trade index futures in eight regional markets, was up 17.5 percent in August according to investor letter seen by Reuters. The fund has gained 51.5 percent since November 2010 launch.

By comparison, the MSCI Asia-Pacific index was down 8.6 percent in August.

“The quant approach is the way we are trying to revive the fortunes of the firm,” said Prakash, who founded the firm in 2004.

The firm’s assets had plunged by 90 percent to $150 million in the fourteen months to March 2009 after the financial crisis wiped out trillions of dollars from stock markets globally and panicked investors rushed to redeem from funds.

Monsoon Capital, which managed India dedicated long only funds, has since then transformed itself into a quantitative shop betting across Asia-Pacific, giving it a chance to tap a wider range of investors favouring a broader investment theme.

It now manages $400 million, including $55 million in an another quant-driven fund focused on India.

The Asia-Pacific fund trades index futures in Taiwan, China, Hong Kong, Korea, India, Japan, Australia and Singapore. In August, the fund earned more than half of its returns from Korea and India.

“August provided a smooth downtrend that the fund was able to take advantage of by going short,” Prakash said.

The India fund, which gained 6.95 percent in August, trades index futures, options and single stock futures.

Prakash, 42, based in the United States, said he expected his firm to regrow to its 2008 level in the next four years with quant fund assets making up half of its total assets.

He said the India fund had the capacity to take in $500 million while the Asia-Pacific strategy could grow to $2 billion.

The firm, named after seasonal winds bringing rains to many parts of Asia, plans to launch an UCITS version of the Asia-Pacific strategy on Sept. 6. (Reporting by Nishant Kumar; Editing by Chris Lewis)

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