Asian hedge fund industry assets under management grew 16.3% last year to $147 billion, with allocation trends showing a growing preference for global strategies, such as macro, at the expense of vehicles focused on single countries.
Performance accounted for $10 billion of the gains and net inflows $10.6 billion across 1,333 hedge funds, according to research firm Eurekahedge. Asian hedge funds saw 143 launches and 108 closures last year, but are still below their peak assets of $176 billion in 2007.
The data provider attributes last year's gains to a combination of factors – chiefly the Abenomics-fuelled bull market run in Japan and strong returns from managers in Greater China and Australia.
However, the start of 2014 has been less rosy for Asia ex-Japan hedge funds, which posted an average loss of 0.79% in January. Japan, North America and Europe each had a small gain of less than 1%.
Global market volatility last month was driven by the start of bond purchase tapering by the US Federal Reserve in December, which Eurekahedge expects to affect the performance and inflows of emerging markets-focused and pan-Asia funds. “As emerging market woes in Asia crystallise, fund managers are likely to face hardship in wooing investors.”
Geography-wise, Asian hedge funds with a global mandate – which can include macro and multi-strategy vehicles – hold the lion’s share of industry assets with 23% of the region’s AUM, followed by pan-Asia funds at 20.6%.
This is a marked change from 2007, when pan-Asia funds held a 28% share – nearly double that of global mandates (14.8%).
Some of Asia’s billion-dollar-plus strategies have a global investment focus, including Myriad Opportunities Master Fund ($2.4 billion), Turiya Fund ($2 billion) and Tybourne Equity Fund ($2 billion), which are all managed in Hong Kong.
Meanwhile, asset allocations to funds with a single-country mandate – such as those focused on Japan, India, Korea and Taiwan – have also fallen to 14% from 17.5% in 2007.
Strategy-wise, while assets held by long/short equity funds have been gradually shrinking, they continue to account for the largest share of Asian AUM, with 39.4%, albeit down from 54.3% in 2007.
Long/short equity and event-driven funds were the best performing strategies in Asia last year, turning in respective gains of 19.2% and 22.7%. Event-driven has posted the highest annualised returns over the past three years, at 12%.
Meanwhile, the lowest returns in 2013 came from fixed income (1.2%) and arbitrage (2.7%).
Eurekahedge expects to see a continued flow of assets into funds with a global mandate and a further reduction of market share for long/short equity. It says such trends are signs of a maturing hedge fund industry.