Ovata Capital Management Ltd., a Hong Kong hedge fund overseeing US$1.5 billion, will shut its doors as its founder and most of its staff prepare to join U.S. multistrategy giant ExodusPoint Capital Management, according to a person familiar with the matter.

In a major expansion into Asia stock trading, the US$14.5 billion ExodusPoint will add Ovata chief investment officer James Chen in the third quarter as its head of equities for the region, the person said, asking not to be identified discussing private information. Chen will bring along the vast majority of the roughly 40 employees at his own firm, the person added.

An ExodusPoint representative and Chen declined to comment.

Large multistrategy, multimanager hedge funds such as Millennium Management have been grabbing the lion’s share of capital flows into the global industry. Founders of smaller hedge funds have increasingly been closing their doors to join them, gaining the opportunity to oversee larger pools of investments with the backing of stronger support teams. For the bigger firms, the arrangement offers an alternative to piecemeal hiring during an ongoing talent war.

ExodusPoint, founded in 2017 by Millennium alumni Michael Gelband and Hyung Lee, recently raised US$2 billion of new cash in a round that included money from Abu Dhabi Investment Council, an independent unit of sovereign wealth fund Mubadala Investment Co. Its hedge fund returned four per cent in the first five months of this year, adding to last year’s 18 per cent gain.

ExodusPoint has about 100 portfolio manager teams across eight offices globally, of which three are in Asia: Hong Kong, Singapore and Tokyo. Steve Xu heads its Asia macro trading business.

The arrival of the Ovata team will add depth and scale to ExodusPoint’s existing regional equities trading business.

Unlike the typical stock pickers that dominate the Asian hedge fund industry, Ovata’s investment strategies include equity long-short, event driven, relative value, systematic and arbitrage strategies — a range that is typically found at multistrategy platforms. Its hedge fund gained 10 per cent this year through May, the person said.

Chen has had more than 25 years of experience trading for banks and hedge funds. A former Barclays PLC managing director, he once led the bank’s Asia-Pacific program trading and Asia cash equities risk trading, according to his LinkedIn profile and the bank’s announcements at the time. Michael Platt’s BlueCrest Capital Management tapped him to lead its push into Asia equities trading in 2014. He founded his own firm in 2017, with backing from Canada Pension Plan Investment Board.

Earlier in his financial industry career stretching back to 1996, Chen worked for Credit Suisse, Bear Stearns and JPMorgan Chase & Co., according to his LinkedIn profile. At Ovata, he leads relative-value investment, in addition to the CIO role.

—With assistance from Nishant Kumar and Liza Tetley.

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Bloomberg.com