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Ovata Capital's Dynamic Growth Surge in Volatile Markets


Michael Chen

May 16, 2024 - 05:11 am


Ovata Capital Management's Strategic Expansion Amidst Market Uncertainty

In the ever-evolving landscape of the finance industry, Ovata Capital Management Ltd. has made a significant move by expanding its team following a substantial increase in assets. The Hong Kong-based hedge fund, spearheaded by BlueCrest Capital Management LLP alumnus James Chen, has catapulted past the $1.1 billion mark and responded by bringing on board four talented portfolio managers and traders.

James Chen, well-known in industry circles for his strategic vision and leadership, has always held ambitions of growth and innovation for Ovata. His prior experience at BlueCrest equipped him with valuable insights that he has since been applying at his own firm. In a silent yet assertive move, Ovata has hired professionals of calibre to further its equity reach and enhance market strategies, according to a source familiar with the developments who preferred to remain anonymous.

Dan Ho, who shares a common professional thread with Chen through their former days at BlueCrest, has been appointed as a portfolio manager. His primary role will focus on equity relative-value investments, capitalizing on his extensive background and in-depth knowledge of equity markets to navigate the complexities of today's financial environment.

Jon Lowry, who previously honed his skills at Millennium Management and Elliott Management Corp., has been recruited as an Asia event-driven portfolio manager. The strategic addition of Lowry to the team is anticipated to fortify Ovata's expertise in capturing market opportunities borne out of corporate events and geopolitical shifts.

Adding to the newly curated team, Lucas Eshleman and Dominic Ho step in as traders to strengthen the operational backbone of Ovata's trading activities. The know-how and agility of these individuals are pivotal components as Ovata seeks to stay one step ahead in executing trades and managing its burgeoning portfolio.

Unfortunately, Chen has opted to stay tight-lipped about these latest appointments, underscoring a possible strategy of maintaining a low profile while navigating the current challenging economic climate.

Since its inception in 2017, Chen has steered Ovata from its nascent stage with an initial fund of over $200 million to its current status as a key player in the hedge fund domain. The firm showcases an impressive roster of investors, notably including the Canada Pension Plan Investment Board and New Holland Capital. With around 40 personnel on its payroll, the firm maintains an even split between investment professionals and support staff, creating a balanced and well-supported organizational structure.

The past few years have been nothing short of a roller-coaster ride for the Asian hedge fund industry. Market players such as Ovata have had to navigate through a minefield of geopolitical tensions, regulatory upheavals, and broader economic downturns. For many of these funds, particularly those vested heavily in bullish Chinese market predictions, the often volatile regional landscape resulted in significant financial setbacks. However, Ovata has managed to weather this storm with strategic agility and a diversified approach to investment.

Moreover, Ovata's multi-strategy approach has positioned it well against regional competitors and the looming presence of global entities like Millennium, which possess extensive resources to attract top talent within the industry. This capability to draw skilled individuals has become a battlefield where firms vie for an edge through the expertise and innovation that such talent can bring to their operations.

A realignment of investor focus seems to be underway, shifting from the once predominant China-centric managers to more geographically diverse entities like Ovata. This adaptability allows firms to explore a wider array of investment strategies and engage with varied opportunities across Asia, aiming for more stable returns amid regional uncertainties.

In light of these dynamics, Ovata's forward-thinking tactics have borne fruit. The company has reported commendable performance, with a noteworthy gain of 10% in the previous year, as referenced by the knowledgeable person. Additionally, it sustained its momentum with a 5.6% increase in the initial four months of the current year. This growth trajectory stands in contrast to the modest 2% rise last year and 3.4% in the early months of this year, reported by the Eurekahedge Pte index that tracks Asia-focused hedge funds.

Emphasizing their strategic choices, Ovata has capitalized on arbitrage and relative-value trades, which have been instrumental in elevating their performance for the year. A prominent contributor to this success has been the Indian market, which has served as a key catalyst for returns over the last 18 months.

Ovata's trading mechanisms are multifaceted, with some strategies tailored to exploit the price variances of holding companies versus their subsidiaries. They also adeptly arbitrage pricing discrepancies found among shares of identically named companies that are listed across different exchanges, leveraging these gaps to the benefit of their clients and their strategic growth.

The landscape of corporate governance in Asia has seen reforms that are creating new landscapes for astute traders to navigate. In Japan, for example, reforms prompting companies to untangle cross-shareholdings have led to opportunities for holding companies to spin off and list their subsidiaries separately. Similarly, initiatives like South Korea's "corporate value-up" program, which aims to bolster listed companies' valuations through tax incentives, are fueling investor expectations for increased activity in the sector.

In an ambitious move that appears prescient given the current market conditions, Ovata enhanced its team last December with the addition of Dennis Collins. Previously of LMR Partners, Collins joined as a portfolio manager specializing in share sales, a role that is becoming ever relevant amid surging expectations for a rebound in deal-making activity.

Notwithstanding its expansive approach and recent successes, Ovata faces the same challenges as its peers when it comes to safeguarding its most valuable asset: its workforce. Indeed, the battle for talent is intensifying, with global competitors often offering enticements that can lure skilled professionals away. Acknowledging this reality, Ovata recently witnessed the departure of Abhinav Maheshwari, a partner who had carved a niche within the firm through his focus on relative-value investments. Karyo Oh, another skilled portfolio manager once overseeing Japanese investments, also left, as indicated by regulatory records.

Despite these headwinds, Ovata's commitment to evolving and adapting remains unwavering. As the firm scales new heights, the strategic integration of new talent and diversification of its investment portfolio suggest a future replete with potential. It is a journey marked by careful selection of opportunities and judicious management of talent—elements that, when skillfully balanced, can lead to sustainable growth and enduring success in the fickle waters of hedge fund management.

For further information and insights into Bloomberg's reporting on Ovata's progress and related market analysis, visit Eurekahedge's gauge on Asia-focused hedge funds.

The strategic foresight and meticulous planning exhibited by James Chen and his team at Ovata Capital Management signal a resolute march forward, unfazed by the market volatility that has become a hallmark of the global financial narrative in recent years. As we stand back and observe the potential trajectory of such an enterprise, it is clear that the firm is poised to continue making waves in the dynamic arena of Asia's hedge fund industry.

©2024 Bloomberg L.P.