Ex-Goldman Trader's Hedge Fund Said to Return Clients' Cash

(Bloomberg) -- One of Asia’s best known hedge-fund managers is returning investors’ money and turning his firm into a family office, according to people familiar with the matter.

Morgan Sze, who launched Azentus Capital Management Ltd. in 2011, has so far handed back about 95 percent of the fund’s external investment of $100 million, one of the people said, asking not to be identified because the matter is private. The former Goldman Sachs Group Inc. trader is joining a growing number of money managers exiting the industry amid falling returns and competition from cheaper passive funds.

Hong Kong-based Azentus was one of the region’s biggest hedge-fund startups in the years following the financial crisis. It started in April 2011 as an Asia-focused, global multi-strategy fund and doubled its assets under management to about $2 billion within four months.

The fund has shrunk since then, and Sze decided to turn it into a family office because he felt the fund was too small to weather the market volatility that may come over the next few years, one of the people with knowledge of his plans said. Sze will return the remaining 5 percent of outside cash in the next two months after a final audit of the fund is completed, one of the people said. He will continue to invest about $40 million of his own money.

The hedge-fund manager has switched gears before. In early 2015, Sze changed Azentus’s focus to so-called concentrated betting on and against stocks. He allowed investors to exit at this point, and most redeemed their money. Investors who stayed with the firm profited, the person said.

Earthquake Bonds

Sze helped create earthquake and hurricane bonds at Goldman Sachs in the mid-1990s. He was global co-head and later sole head of Goldman Sachs Principle Strategies, the bank’s largest proprietary trading unit.

Several money managers who left their banks’ proprietary trading desks to start their own hedge funds after the 2008 crisis have struggled. Automated trading and the rise of index-tracking strategies have made stock-picking less attractive to investors. Add to this higher costs, fee pressures and more onerous regulation, and it’s been a challenging few years for hedge funds.

Michael Platt’s BlueCrest Capital Management LLP converted to a family office just over three years ago, while Deepak Gulati’s Argentiere Capital is returning outside capital in its $940 million flagship fund.

Investors pulled more than $37 billion from hedge funds last year, with another $1.7 billion exiting in January, eVestment data show. Funds lost an average of more than 4 percent in 2018, according to Eurekahedge.

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