Chinese internet stocks propel US hedge fund to double-digit returns

Booming Chinese internet stocks have fuelled Passport Capital’s double-digit gains this year at a time when many other hedge funds have delivered only modest returns.

The San Francisco-based fund, which invests US$3.1 billion for clients, has returned 18.3 per cent year to date, after gaining 2.4 per cent last month, an investor with the fund said on Wednesday.

The average hedge fund has gained only about 6 per cent this year, according to industry data, falling far behind the 25 per cent rise posted by the Standard & Poor’s 500 index.

Hedge funds’ generally lacklustre returns, coupled with their high fees, have raised questions among their wealthy investors about how effective these investment pools have been.

But Passport, best remembered for its 219 per cent gain in 2007 just before the financial crisis, has set its sights abroad, stocking its flagship Global Strategy fund with picks from China and Saudi Arabia.

Chinese real estate internet portal Soufun, one of Passport’s biggest holdings, has surged 196 per cent this year, having received a boost early this week when it announced plans to launch a financial services platform later this month.