For most Asian hedge funds , 2022 proved to be a year of pain as a gauge of regional fund returns finished the year with an 8.3 per cent loss. But some money managers beat the odds and turned a profit. In a volatile era where active trading should theoretically trump index investing, here’s how they did it and some of the opportunities they see in the year ahead. Dymon Asia Multi-Strategy Investment Fund The fund enjoyed a 5.1 per cent gain in 2022, growing its assets under management to US$2.3 billion. The key drivers to returns came from anticipating directional moves in Asian currencies, relative value trades in rates, and volatility trades in equities, said Kenneth Kan, deputy CEO of Dymon Asia Capital. Hedge funds add Chinese stocks as BlackRock cautions market view is too rosy For the year ahead, China’s reopening is a theme much of the firm is watching. Chinese “revenge travelling” after the lifting of restrictions could help currencies such as the Thai baht, the Singapore dollar, the Korean won and the euro. Consumption has already started picking up and could accelerate after the Lunar New Year holiday, the fund manager said. In a strong US dollar environment, “one could put on a relative-value FX trade against another country that could see less tourists from China,” Kan said, citing India as an example with comparatively few Chinese arrivals. “In equities, the China reopening trade will benefit travel, hospitality, and luxury stocks in particular.” Modular Asset Management (Singapore) The Singapore-based manager, helmed by Millennium Management alumnus Jimmy Lim, scored a 14.3 per cent gain without a down month last year, with its assets under management sitting at US$1.1 billion. One trade that did well was a year-long bet through November favouring the Singapore dollar against a basket of currencies of its trading partners. It anticipated the city-state to be the first in the region to exit Covid restrictions, leading to higher trade and tourism flows. A further boost came from the central bank’s move to strengthen the currency to combat inflation, Lim said. Rabbit fortune-reading: Hang Seng’s 30,000 struggle and Taiwan black swan alert Modular also envisioned post-Covid reopening would help Malaysia absorb labour displaced from service industries, bringing wage pressure and leading to rising local interest rates. The wager paid off when Malaysians hoarding the greenback led to tighter liquidity and credit conditions, forcing rates up, he added. The firm built a position in October that would profit from a rebound of the Japanese yen when it weakened to around 150 per dollar. The company benefited when Japan reopened its borders that month, Lim added. It also had various Japanese government bond wagers, anticipating earlier-than-expected Bank of Japan yield curve control changes. Modular started betting in November that China would exit Covid restrictions sooner than the market anticipated, shifting focus to boosting consumption and helping hard-hit industries to stabilise and recover. “This would mean support especially in the property sector and also easing of technology sector constraints,” Lim said. “In this process, liquidity will have to be kept loose or at least not tightened.” He expects the long Chinese bonds and equity trades to continue to work out past the Lunar holidays. Asia Genesis Macro Fund Chua Soon Hock retired from the hedge fund industry for many years before deciding to return with a fund in 2020. His macro fund returned 15.3 per cent in 2022, with assets standing at US$173 million. Much of this was thanks to shorting US stock indices as well as Treasuries. His fund switched the latter to a long position in the third quarter amid rising interest rates. Biden and Kishida agreed US and Japan must steady China relations: officials Now, the fund is expecting more uncertainty from geopolitical tensions, supply chain challenges, inflation and interest rate pressure. Asia Genesis plans to trade the Nikkei 225 Index, predominantly on the short side, with two-way swings expected in the market, the firm said in a note to investors. “2023 is likely to have its share of turbulence, where we will witness shorter bull markets with more frequent bear phases,” according to the note. “We can anticipate further weakness in housing and the most rate-sensitive components of consumer spending, before further knock-on effects on income, employment, profitability, and asset prices.” The fund’s other investment ideas include long bets on the Hang Seng Index and the Singapore dollar, and tactically shorting the Japanese yen against the US dollar.