A once-blistering Hong Kong hedge fund has suspended operations after detecting unspecified "irregularities," according to a letter to its shareholders.

The CSA Absolute Return Fund, a $200 million "fund of funds" managed by Hong Kong-based Charles Schmitt & Associates, told shareholders that it was halting operations after consulting with local securities authorities.

CFO Jennifer Carver and managing director Brian MacDougall "came across some internal documents that led us to suspect irregularities in the CSA Absolute Return Fund, managed by Charles Schmitt. Based on our suspicions we approached the HK Securities and Futures Commission for guidance. Following further investigations the SFC has taken steps to halt CSA's dealings and secure fund assets," according to the letter.

Fund officials couldn't be reached for further comment.

Such a blowup is a relatively rare occurrence in the tiny world of Asian hedge funds. Only about 360 of the estimated 8,600 hedge funds worldwide are based in Asia, and the region saw only 86 new funds launched in 2003, according to Eureka Hedge, a financial publisher.

The CSA Absolute Return Fund invests in about 10 individual U.S. hedge funds. Charles Schmitt & Associates also runs a fund of hedge funds listed on the Dublin Stock Exchange and a similar fund of funds domiciled in the British Virgin Islands. The $22.7 million Dublin fund opened to investors in February. The BVI fund had about $58.7 million under management, according to the firm's Web site.

Carver told investors that there are no apparent problems with the other funds.

"There is nothing I can possibly say to express how sorry we are," she wrote.

George Van, founder of Van Hedge Fund Advisors International of Nashville, Tenn., said his firm established a marketing and development agreement last March with Charles Schmitt & Associates for the British Virgin Islands fund. Van said he was surprised to receive Carver's letter.

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