Last year was very much “risk off” when it came to investing into Asia Pacific hedge funds, largely as a result of the worrying European sovereign debt crisis.
Last year was very much “risk off” when it came to investing into Asia Pacific hedge funds, largely as a result of the worrying European sovereign debt crisis. Even though the region saw healthy growth in terms of startup numbers, average fund size was small: USD10million to USD12million. Those that broke the USD100million barrier, such as Davide Erro’s Turiya Fund, were very much outliers. Figures obtained by Hedgeweek reveal that Asian hedgies managed to attract just USD3.4billion in 2010 with most of those new assets going to the more established “branded” hedge funds. HFR Research reported strong inflows of USD300million for Q3, but overall asset growth was disappointing; up 3.9 per cent to USD137.8billion (as of September 2010).
Against this tough capital raising backdrop, Hedgeweek spoke to Dan McNicholas (pictured), Head of Financing Sales BAML Hong Kong, to see what his thoughts were for 2011. “My outlook is much the same as last year,” said McNicholas. “It’s likely to improve slightly y-o-y but not to the extent of the heady days of ’06 and ’07. We’re expecting to see an accelerated trend of Australian superannuation funds investing into global funds, whilst Japan is likely to move away from domestic to more international investments, primarily US managers.” Even though a lot of the bigger hedge funds are reaching capacity, McNicholas believes the cascade effect of global fund managers closing and allocations going to mid-size managers “will be minimal” because once the 40 biggest funds close, it’ll be the 40 next biggest that’ll benefit. “I don’t think sub-USD100million funds will experience a sea-change (with respect to cap raising), it’s probably overstated at the moment,” said McNicholas. In his view, managers running sub USD25million funds will still find it hard attracting new capital: “Institutional-level fund managers with more than USD100million in AUM that will see the biggest improvement this year.”
