Aussie hedge and boutique funds cross $200 billion
Australia’s hedge fund and boutique asset management industry, buoyed by superannuation allocations, has reached A$208.4 billion ($219 billion) in assets, with some well-capitalised firms using their fortunes to expand into Asia-Pacific.
Of the total, A$42.8 billion is attributed to 63 hedge funds, finds data from the Triple A Partners/Basis Point Consulting Australian Hedge and Boutique Fund Directory. It compares with A$37 billion in hedge funds and long-only absolute return assets managed in Hong Kong, and A$20 billion in Singapore.
The five largest hedge fund managers in Australia are Platinum Asset Management with A$14 billion in AUM, Blackrock Investment Management Australia ($5.8 billion), GMO Australia’s Systematic Global Macro Trust (A$1.9 billion), Macquarie Group’s MQ Specialist Investment Management (A$1.6 billion) and PM Capital (A$1.6 billion), according to estimates by Basis Point Consulting.
In the boutique asset management sector, there are 102 independently owned firms running A$165.6 billion in predominantly long-only strategies. Combined with hedge fund sector capital, the total of A$208 billion in AUM is roughly equal to 17% of the A$1.19 trillion managed by all investment managers in Australia.
The healthy asset size can be partly attributed to the A$1.4 trillion superannuation industry, which allocates about 3.6% of AUM to hedge funds, says David Chin, managing director of Basis Point Consulting.
Investment capital into hedge funds is split evenly between four categories: high-net-worth investors, offshore investors, Australian institutional investors and Australian wholesale investors.
The offshore investors are largely overseas funds of funds, says Chin, while superannuation funds comprise the bulk of domestic institutional investor inflows.
One channel for tapping high-net-worth investors which has proven fruitful for Platinum is through self-managed super funds (SMSFs). The scheme, which enables individual investors to structure their own pension fund portfolios, has A$439 billion in AUM, at an average of A$918,000 per individual fund.
“It’s quite a significant force,” says Chin. “If you can tap into that with appropriate products, you’ve got quite an attractive pool of investment capital.”
A spill-over effect from asset growth in the domestic hedge and boutique funds industry is expansion outside of Australia into Asia and elsewhere. A few funds have established offices in Hong Kong, Singapore and as far afield as London, says Chin.
He declined to name any firms, although it is known that Select Asset Management, a Sydney-based fund-of-funds house, plans to increase its exposure to Asia, while Treasury Group is said to be looking into investing in funds in the region. Ascalon Capital received a licence from the Hong Kong Securities and Futures Commission in April this year.
Global expansion is “part of a general trend that you see among US and European hedge funds”, says Chin. “I would expect the larger Australian hedge funds to do the same, especially those that have global investment mandates.”