There are no two ways about it – Asia has ambitions to become one of the fastest-growing regions in the alternative investment market. With Western markets under pressure, the focus of the investment community is turning to opportunities in the East. And while traditional financial centres such as Hong Kong and Singapore are still the most popular in the region, one of the more interesting stories is mainland China, especially with its plans for Shanghai to become a major financial centre.
This story of Asian growth is not limited just to investment opportunities but also to the development of a robust regulatory framework. Jurisdictions such as Hong Kong and Singapore, with their well-established and structured legal and regulatory regimes, are among the most preferred centres in Asia in which to set up management and advisory companies.
Much of the growth potential is in funds with strategies that are outside the scope of traditional equities, even though Asian funds are known for equity long/short and long-bias strategies. In addition, private equity investments and funds are also growth areas; a number of hedge funds are employing hybrid strategies and investing in pre-IPO stocks. These burgeoning areas represent opportunities for quality global service providers to enter the market and offer specialist and targeted services to a variety of strategies and asset classes.
There is considerable scope for local administrators to provide more personalised and client-focused levels of service. This is something that has been overlooked and lacking in Asia for many years, due to the small number of administrators available in the region to service a growing number of funds.
Secondly, administrators must begin to offer more innovative specialist products to managers including fund formation services, Ucits, master-feeder structures, full middle office services and corporate secretarial services. To really add value to client fund managers, it is important to be able to service any strategy in any domicile locally where the fund manager sits to provide the best service levels.
Again, one of the bigger opportunities lies in the growth potential of mainland China. Setting up a physical presence in China requires a close understanding of the intricacies of forming and operating a company on the mainland, as opposed to operating in Hong Kong and Singapore, which is still considerably easier. Despite these challenges, companies such as Apex that have made a long-term commitment to the area are greatly appreciated by local fund managers, investors and regulators.
The financial crisis has highlighted the opportunities in Asia for the rest of the world. The banks were not investing in over-leveraged products and the continent’s economies are producing strong growth numbers, factors that have helped Asia emerge from the crisis well before other parts of the world.
With this in mind it is perhaps not a surprise that the region has experienced an increase in the number of funds relocating to or establishing offices in Asia. This represents further evidence that established fund managers in the US and Europe are prepared to make a long-term commitment to the region and are looking at capitalising on Asian opportunities.
Anthony D’Silva is managing director at Apex Fund Services