Some of Europe's largest investors are showing increased interest in hedge fund managers in Asia, and advisers based out in the region are emphasising the industry has changed significantly since the crisis.
Some of Europe’s largest investors are showing increased interest in hedge fund managers in Asia, and advisers based out in the region are emphasising the industry has changed significantly since the crisis.
Allocators should not journey to Asia, in search of hedge funds, with outdated preconceptions, the advisors say.
One European-inspired allocator that should not have an old picture of Asian hedge funds is the multi-strategy seeding platform IMQubator, backed by APG, the asset manager for Dutch pension Stichting Pensioenfonds ABP.
IMQubator signed a mutual advisory relationship in January with Synergy Fund Management, an investment manager and advisor based in Hong Kong and founded by Eliza Lau, former CEO and CIO of SAIL Advisors in Hong Kong.
Lau (pictured) says: “Asia has a strongly developing hedge fund market and lots of potential in the coming year as volatility is likely to go higher across the globe. We see a broad spectrum of hedge fund strategies with Asian emerging manager candidates.”
The stereotype of Asian hedge managers being wholly and permanently long-biased is mis-placed.
“The Asia Pacific industry can participate in relative-value, and multi-strategy, and event-driven, and convertibles and credit,” Lau notes, and Synergy has invested in Asian agricultural funds, for example. Over five years, one generated a Sharpe ratio of over 2, annualised returns exceeding 32%, and has no losing year.
“China is a big commodities market and it can deliver excellent returns because the volumes are great, and food is in great demand in China and India and South Korea.”
Lau notes the number of funds available in Asia has blossomed at least four-fold from around 300 names [before 2003]. The strategies pursued have also broadened.
“The landscape here has changed, but endowments or pensions might still remain in the mindset of five or 10 years ago.
“There is great opportunity to invest in Asian hedge funds. Compared to the markets in Europe and the US, there are economies with decent growth, and the market still has decent volatility, which helps managers make returns.
“Asia, and in particular China, has underperformed this year, and many investors I talk to reduced China, or cut it if not shorted it, so their holdings in China are minimal. As we are seeing more positive notes coming out from China, along with the new administration and leadership coming on board, the currently undervalued China markets may have found supporting ground and I foresee a good turnaround coming.”