New capital will be limited to outliers with strong performance, BNY Mellon says
Asian hedge fund managers are facing a slowdown of investment inflow this year and will increasingly turn to ultra-high-net-worth investors, family offices and even their own friends to supplement inflows from US institutional investors, according to a BNY Mellon analysis.
‘One of the main headwinds for the average hedge fund in Asia in the year ahead will continue to be raising capital,’ Aidan Houlihan, managing director of BNY Mellon’s alternative investment services in Asia, says in a release.
‘The new capital coming into Asia will largely be limited to outliers that have significantly outperformed both peers and the broader market. These fund managers have consistently been rewarded with capital inflows, and investor interest in them remains high.’
Houlihan predicts Asia will see fewer hedge fund launches this year but the quality of investment and the amount of funds under management will continue to increase for existing funds. He adds that Asian hedge funds will be increasingly diverse in their strategies.
Currently, he says, 75 percent of hedge fund assets under management in Asia consist of equity long-short funds, down from 90 percent a few years ago, and funds are shifting gradually toward ‘more esoteric credit and macro-oriented strategies as well as multi-strategy funds.’
‘The spate of high profile launches in the first half of 2012 ultimately proved short-lived,’ Houlihan adds. ‘Many, however, have found success tapping less conventional capital-raising channels such as family offices, ultra-high-net-worth individuals and personal friends. Smaller funds have also adapted by becoming creative in their investor targeting.’
Hedge Fund Research (HFR), the analysis firm focused on the hedge fund industry, said this week that capital invested in the Asian hedge fund industry increased 7.5 percent last year to $88.25 bn, a fraction of the $2.25 tn invested in the global hedge fund industry.
The number of Asian hedge funds rose by 5.3 percent last year to 1,150, with 31.7 percent of them in China, according to HFR. After China, Singapore and Australia were the most common headquarters location for Asian hedge funds.
