Private pension funds and asset managers in Asia boost hedge fund investments in search for diversification
Asians constitute an increasing portion of hedge fund investors as the number of wealthy Asian institutions and companies rises and they seek to diversify their investments, according to a study by industry research firm Prequin.
Asian private sector pension funds have increased their investments in hedge funds to 15.7 percent of their assets under management from 13 percent in 2013, Prequin data show. At the same time, Asian private wealth firms have increased their hedge fund investments to 17 percent of their assets from 15.7 percent.
The data also show that asset managers in Asia currently allocate 8.7 percent of their portfolios to hedge fund investment, from 5 percent last year, and public sector pension funds in Asia now devote 4.5 percent of their portfolios to hedge funds, from 4 percent in 2013.
‘An increasing number of institutional investors across the region are actively seeking allocations to hedge funds in search of diversification and risk-adjusted returns,’ Prequin writes in its monthly Hedge Fund Spotlight report. ‘These developments have allowed hedge fund managers to attract large amounts of capital from the region in spite of greater regulatory scrutiny.’
Prequin also says a large increase in investments in hedge funds will likely come soon from Japanese investors, who currently have an average of 9.8 percent of their portfolios placed with hedge funds but aim to increase that to an average of 13.6 percent. Investors in Hong Kong have about 12.5 percent of their assets with hedge funds but aim to increase that to 14.4 percent.
The research also shows that Australia accounts for 32 percent of Asia-Pacific based institutional investors while Japan accounts for 24 percent and Hong Kong is home to 13 percent. Singapore accounts for 11 percent, South Korea has 8 percent and China accounts for only 3 percent.
A third of institutional investors who invest a portion of their assets with hedge funds seek a long/short equity strategy while a quarter look for a hedge fund with a diversified strategy. Just over a fifth (21 percent) look for a macro strategy while 16 percent seek multi-strategy investments and 14 percent look for event-driven investment strategies.
