Asian Century Quest Capital, a New York-based hedge fund firm that managed nearly $2 billion in 2012, is down to less than $100 million in assets following client redemptions and tepid performance, according to a person familiar with the situation.
But ACQ, as Brian Kelly's firm is also known, is staying alive despite rumors that it would shut entirely after the roughly 95 percent drop in capital in less than two years.
It will continue to manage the ACQ Equity Income Fund, which as a long-only fund does not take positions against stocks, for a small group of external investors, according to the person. All other funds, including the flagship long/short equity hedge fund, are in the process of being liquidated and most money has already been returned to investors.
Kelly declined to comment.
(Read more: Asia shares find tentative support, mood brittle)
ACQ was founded in 2005 by Maverick Capital veteran Kelly and focused on betting for and against Asian stocks. The firm grew quickly and managed as much as $1.74 billion on July 1, 2012, according to data from HedgeFund Intelligence.
But the firm gained only about 5.5 percent net of fees in 2013, hurt in part by shorts of Japanese companies. By comparison, the Dow Jones Asia/Pacific Total Stock Market Index gained more than 10 percent in 2013 and the Japanese Nikkei 225 Index rose nearly 57 percent.
ACQ now has nine total staffers with five of them focused on investing, according to the person. That's down from 33 in 2013, according to a Securities and Exchange Commission filing. Two employees, Paul Saferstein and Adam Wolfman, have elected to stay with ACQ after considering spinning off their own money management firm.
Wolfman declined to comment and Saferstein did not respond to a request.
ACQ's troubles come as another large shop focused on Asian investments chose to close in recent days.
Roughly $5 billion Joho Capital announced Jan. 30 it was returning capital to investors, according to Alpha magazine and other media reports. New York-based Joho gained more than 30 percent in 2013 The decision by founder Robert Karr reflected a desire to work less and spend more time with family, according to a letter he sent to investors.
Other Asia-focused hedge funds performed well in 2013.
The AsiaHedge Composite Index, which tracks hedge funds focused on the region across strategies, gained 13.61 percent in 2013, its best performance since 2009 (16.18 percent).
ACQ's flagship fund produced a cumulative gain of 76.6 percent from inception in March 2005 through Dec. 31, 2013, according to an investor. That's better than a benchmark MSCI All Country Asia Index return of 63.3 percent over the same period. The fund balance tilted 35 percent in favor of long positions, making its returns more impressive compared to the index, which is not hedged and therefore has no shorts.
Kelly believes Japan's extraordinary monetary and fiscal policy will continue to provide support for its equity market and the recent sell off is an opportunity to invest further in the country, according to a person familiar with his thinking.
—By CNBC's Lawrence Delevingne. Follow him on Twitter