Hans Schlaikier, Hedgeweek

EM hedge funds hit record… Credit Suisse takes No2 prime broker spot in Asia…

Emerging markets hedge funds recorded total investments of USD151 billion, after accumulating over USD1.8 billion during the first quarter of 2013.

According to the latest data from Hedge Fund Research, the first quarter’s inflow follows another strong performance in the last quarter of 2012, where over USD3 billion was allocated to Emerging Markets funds.

Hedge Fund Research reports that during 2012, HFRX Multi-Emerging Market Index posted a strong 13.14 per cent return, with HFRX India Index generating 27.63 per cent in returns, followed by HFRX BRIC Index yielding 13.41 per cent return.

The HFRX Multi-Emerging Market Index provided 5.9 per cent return through April, with Asian hedge funds posting strong performance. Chinese funds generated 8.8 per cent return, while Korean funds were up by 10 per cent and Asia ex-Japan funds generating 8.1 per cent return. In contrast, global hedge funds have delivered a below par 3.8 per cent return for the first four months of 2013. These returns compare poorly with the MSCI World Index, which has delivered 11.9 per cent return for the period.

According to The Eurekahedge Report, amid divergent trends observed in the global markets, on the whole, hedge funds posted positive returns in April. In particular hedge funds targeted at Asia on average provided 9 per cent returns during 2013.

The Asian prime brokerage unit of Credit Suisse has replaced Morgan Stanley as the second largest firm servicing Asia's USD148 billion hedge funds industry, a recent survey showed.

The annual survey by AsiaHedge, found that Goldman Sachs remains Asia's top prime broker with 179 clients and total assets under management of USD24.6 billion.

Credit Suisse overtook Morgan Stanley by adding 14 new clients and USD2.4 billion in assets through 2012, a first for any prime broker in Asia, the survey showed.

Prime brokers provide services such as clearing trades and lending money to hedge funds. The fiercely competitive industry is going through a rough patch in Asia, where raising capital is becoming more difficult and many funds are shutting down.

In Hong Kong and China, the biggest hedge fund centers in the region, Credit Suisse emerged as the top player, replacing last year's leader Deutsche Bank AG . Overall in the region, Deutsche Bank and UBS AG retained their No. 4 and No. 5 rank respectively, the survey showed, while Citigroup Inc replaced Bank of America Corp as No. 6 prime broker in the region.

BlackRock Inc. has agreed to buy private-equity property investment advisory firm MGPA for an undisclosed amount to expand real-estate business in the Asia-Pacific region and Europe.

MGPA manages about USD12 billion, focusing on real estate funds management, co-investments and separate-account mandates for institutional investors, according to statement released by BlackRock. The transaction is expected to close in the third quarter and won’t materially affect BlackRock’s earnings per share.

BlackRock, led by Chief Executive Officer Laurence D. Fink, has expanded into private equity, real estate, energy and hedge funds as investors seek to diversify beyond stock and bond funds. MGPA employs 220 people in 13 offices in the Asia-Pacific region and Europe, including cities such as Shanghai, Kuala Lumpur and Warsaw.

BlackRock’s USD13 billion existing real estate investment business is focused on the US and the U.K. In contrast, about two-thirds of MGPA’s assets have been deployed in Asia, where the firm has made about 130 investments over the years.

BlackRock built its alternatives business through acquisitions, adding private equity with its purchase of Merrill Lynch & Co.’s investment unit in 2006 and the hedge fund-of-funds business from Quellos Group LLC in 2007. Last year, the firm bought a fund-of-funds unit from Swiss Re Ltd., which invests client money in private-equity partnerships. BlackRock manages USD3.9 trillion of assets globally at the end of March, according to today’s statement.

The Australian Securities and Investments Commission (ASIC) will consider submissions from the industry in order to refine the definition of 'hedge fund'.

The announcement follows concerns over the current definition of 'hedge fund' and affects a number of funds that do not exhibit the same risks to investors as 'true' hedge funds, ASIC said.

The commencement of the regulatory guide 'Hedge Funds: improving disclosure' has been postponed until February 1, 2014, to allow time for submissions. The currently regulatory guide on hedge funds defines them as a registered managed investment scheme that is promoted as so.

The document also states that the main characteristics of hedge funds are the complexity of the investment strategy or its structure, the use of debt, the use of derivatives subject to limited carve-outs, the use of short selling, or the rights to charge a performance fee. ASIC considers that any scheme with two or more of these characteristics can be considered a hedge fund.

ASIC has also extended until February 1, 2014, the transitional relief to hedge fund issuers that had previously issued a shorter product disclosure statement (PDS) on or before 22 June 2012.

Last December, ASIC extended to June 22, 2014, the interim class order relief from the shorter PDS regime for multi-funds, superannuation platforms and hedge funds.

In June 2012 ASIC released a class order named 'Relief from the Shorter PDS regime', which excludes hedge funds from the shorter PDS regime, so if an issuer had issued a shorter PDS for a hedge fund on or before 22 June 2012, it can continue to use the shorter PDS.

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