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Zhen Liu, E Fund Management

Asian hedge funds turn to family offices

Hedge funds running less than USD100million in Asia are turning to family offices and HNW investors reported Bloomberg this week. As the industry attracts more institutional investors looking for skin in the game by focusing on the big branded managers with AUM north of USD500million it’s becoming increasingly harder for small fund managers to compete for a slice of the asset pie. Hedge Fund Research noted last year that the lion’s share of global net inflows went to billion dollar hedge funds. Pension funds, coming under increasing pressure to meet long-term liabilities, are starting to write tickets of USD100million or more, ruling out a large swathe of Asian hedge funds. According to Eurekahedge Pte, 64 per cent of the region’s hedge funds, as of August, had an AUM of USD50million or less. Some 67 per cent of institutions looking to invest in hedge funds over the next 12 months will focus on managers with a track record of three years or more according to a Preqin report in September.

Consequently, the small boutiques are being overlooked. E Fund Management, China’s second largest asset manager, launched the mainland’s first officially registered hedge fund in April and Zhen Liu (pictured), the firm’s managing director of index and quantitative investment, was quoted as saying: “It is always hard to raise money for new startup hedge funds, but it is generally easier from family offices and private wealth. They are more performance driven and more willing to try out new and novel strategies and managers.” Something that won’t be helping smaller Asian fund managers is the fact that performance has also suffered this year. Eurekahedge’s Asia ex-Japan Index is down -9.16 per cent YTD. One of Asia’s family offices looking to invest in hedge funds is Singapore-based Stamford Privee. According to CEO William Chan the office has been assessing hedge fund managers for at least six months as the traditional market “is going through a shakeout”. He said it was a good time to decide which managers can preserve capital during today’s market turmoil and demonstrate low correlation to stocks and bonds.

Regal Funds Management, based in Sydney, has family office money making up around 40 per cent of the flagship fund’s AUM. Certainly, family offices are more willing to early stage invest in fund managers, and with the capital raising climate unlikely to improve any time soon, that’s something Asian fund managers will take a great deal of encouragement from.         

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