Triple A seeds new hedge fund by Hong Kong's EIP

HONG KONG (Reuters) - Triple A Partners, an alternative fund firm specialising in seeding new managers, said on Tuesday it would invest an initial $20 million in a new hedge fund launched by Hong Kong's Enhanced Investment Products Ltd.

Triple A, also known as Asia Alternative Asset Partners, said it had bought a minority equity interest in EIP as well and signed a deal to distribute their existing and future funds globally.

EIP, which has more than $200 million (132 million pounds) of assets under management, operates using a rare marriage of passive and alternative investing, creating market tracking index funds its EIP Overlay Fund can use to source stock for complex trades.

Chief Executive Tobias Bland, a former Jardine Fleming proprietary trader who founded EIP in 2002, has said the structure is a solution for markets where hedge funds can't easily or cheaply borrow stock they need for their often sophisticated trading strategies.

He told Reuters in June that many of its trades would be less profitable or not even viable if it had to pay to borrow the shares from the prime brokerage divisions of big banks. Large prime brokers in Asia include Goldman Sachs (GS.N) and Morgan Stanley (MS.N).

Its new EIP Aleph Fund, managed by Bland, is expected to launch in January 2009. The Asia Pacific market neutral fund will target absolute returns by employing a number of non-correlated investment strategies.

"With the launch of the EIP Aleph Fund, we are opening our second market neutral fund to take advantage of opportunities that the existing EIP Overlay Fund cannot take full advantage of due to its more conservative risk attributes," Bland said in a statement.

Triple A is partly owned by CLSA, Credit Agricole's (CAGR.PA) Asian investment banking arm. CLSA and Triple A announced last year they would team up to raise funds for investing in start-up hedge funds.

Some hedge fund analysts believe new managers perform better than the industry on average, citing a hunger to prove themselves and build a track record. Part of this may also be because they have less capital, and can invest more nimbly.

But positive hedge fund returns have been rare with the global financial crisis hammering the industry. After five straight years of double-digit percentage gains, the Eurekahedge Asian Hedge Fund Index is down more than 27 percent this year.

The research firm estimated earlier this month that at least 87 Asia-focused hedge funds closed in January-September, while 69 were launched. This compared with 66 closures and 124 launches during the same period last year.

(Reporting by Jeffrey Hodgson; Editing by Jonathan Hopfner)