Hans Schlaikier, Hedgeweek

Asian institutional investors keep faith in hedge fund investments… UBS O’Connor to open Asia-focused hedge fund to external investors

UBS O’Connor is preparing to open its first Asia-focused hedge fund to external investors later this year reported Bloomberg News, according to two people with knowledge of the matter. The fund commenced trading in August with internal money and is now preparing to open itself to external investors. The fund is managed by John Bradshaw in Singapore and David Perrett in New York.

O’Connor is the strategic single manager hedge fund business within UBS’s Alternative & Quantitative division. It is dedicated to absolute return investment management and currently manages in excess of USD5.7billion across global long/short equities, credit long/short, merger arbitrage and convertible securities programs. 

The O’Connor Asia-focused fund will focus on fundamental equity long/short tactical trading according to the two sources. There are believed to be 10 people working on the O’Connor Asia fund, based out of Hong Kong, Singapore and the US. The firm’s flagship global multistrategy fund has been operational since April 2012.  

Asia Pacific-based investors are keeping faith with hedge funds
according to research done by Preqin. Some 41 per cent of institutional investors in the region said that they would be looking to increase their hedge fund allocations over the next 12 months. A further 45 per cent plan on maintaining their current hedge fund allocations, with only 14 per cent of investors expected to decrease their allocations.

That’s a sign of confidence for the hedge fund community and further evidence that investors are applying more of a long-term approach to their hedge fund allocations. The majority of Asia Pacific-based institutional investors stated that the asset class had met or exceeded their expectations over the past 12 months: 43 per cent felt they had delivered on performance, while 38 per cent believed they had over-delivered.

As reported on the China Money Network, the reason why investors in the region are perhaps more satisfied than global investors is because many have invested directly in local Asia-based managers. Last year, the average Asia Pacific hedge fund returned +9.84 per cent according to Eurekahedge. This year, its Eurekahedge Asian Hedge Fund Index is already up +10.50 per cent. No wonder investors are happy.

Hedgeweek has covered the Man GLG Europe Plus fund
– and its ETF equivalent distributed by Source (Man GLG Europe Plus ETF) - various times over the last 18 months. Traditionally a European-focused long-only strategy, research by the world’s second largest hedge fund group has prompted it to increase its exposure to the best ideas from Asia-Pacific sell-side analysts. As reported in the Financial Times, Asian analysts appear far more effective in their BUY recommendations than their US and European counterparts.

The ‘Europe Plus’ fund uses a systematic approach to filter out and trade only the best European BUY recommendations, capturing short-term market anomalies to generate alpha. Man’s research covered 35,000 different buy or sell ratings and found that the recommendations of Asia-based analysts outperformed market benchmarks by an average of 4.3 per cent over a 100-day period. Conversely, UK, US and European analysts achieved just 1.5 per cent.

As a result, Man has decided to widen the net and increase the trading strategy’s Asia exposure and according to Sandy Rattray, chief executive
of the group’s AHL systematic trading division, an Asia version of the Europe Plus trading strategy will be launched

China Investment Corporation (CIC), China’s sovereign wealth fund, is preparing to allocate some of its USD600billion in assets to European hedge funds
, reported FINalternatives this week. CIC’s absolute return managing director Roslyn Zhang reportedly told the SALT conference in Singapore that it was “close to the point of taking action” following two years of consideration. “From the intelligence we gathered from managers, we had been lacking in confidence to pull the trigger,” said Zhang. CIC has apparently been focusing on distressed investments but has yet to decide what strategy to invest in in Europe. Needless to say, any manager who gets onto CIC’s short list will be salivating at the prospect of getting a capital allocation from the sovereign wealth fund. 

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