Decline in October and November increases 11-month loss by 10%

Due to purchases in Chinese real estate loans, hedge fund BFAM Partners, which manages more than $ 4 billion in funds, is on the verge of its first yearly loss in its nine-year history.

Following persons familiar with the fund’s records, the BFAM Asian Opportunities Fund lost more than 10% during the first 11 months of the year, including a 7.5 percent loss in October and a 3.3 percent loss in November.

Fund suffers from sell-off in Chinese real estate bonds

China Evergrande Group and Kaisa Group Holding Ltd., two of China’s most successful issuers of dollar-denominated debt in the real estate business, rocked the markets for months before failing on loans as the government curbed excessive borrowing and speculation in real estate.

Fears of a financial crisis pushed investor demand for Chinese junk bonds to a five-year high on Nov. 9, according to the Bloomberg Index.

Although precise information on BFAM’s credit holdings in China is unknown, the number of junk bonds issued by Chinese developers fell by 21% in October and 4.9 percent in November.

The hedge fund has suffered similar losses in the past. Following a market crash in March 2020, the firm’s high-yielding loan in Asia lost 17 percent of its value, but BFAM preserved its assets, and a year-end price hike allowed the fund to boost its annual growth rate by 8.5 percent.

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