Aussies eyeing investments in Asian hedge funds

Australian hedge fund investors are eyeing managers in Asia as they seek to expand their regional reach in order to grow their business and diversify their portfolios.

Ascalon Capital, the Sydney-based alternatives fund incubator, received a licence from the Hong Kong Securities and Futures Commission earlier this month. It has already invested in two hedge funds in Asia and is scouting out new partners, says Chuak Chan, who heads the Hong Kong operation.

“We’re in the business of forming partnerships with absolute return and hedge fund managers, whether they be start-up firms, or acceleration [capital] arrangements,” says Chan.

Ascalon is one of 12 Australian firms which invest in hedge funds Down Under that have been identified by Basis Point Consulting in Sydney. Of that dozen, there are about three or four others which are examining opportunities in Asia, according to Damien Hatfield, director of Triple A Partners Australia, a Sydney-based hedge fund advisory firm.

“There’s very little investment from Australian funds management [firms] into Asia,” says Hatfield. “I think that’s going to change quite dramatically in the near term.”

Treasury Group is said to be looking into investing in funds in Asia, while Challenger Financial Services, which has a partnership with US hedge fund seeder SkyBridge Capital, is expected to broaden its seeding activities.

Meanwhile, Select Asset Management, a Sydney-based fund-of-funds firm, plans to increase its exposure to Asia, where it is looking to invest a total of $20 million in one to three managers this year, according to a recent report by data provider Preqin.

Up to 50% of Select Asset's hedge fund portfolio is dedicated to investments in Asia managers. Last year it invested in US-based York Capital Management’s event-driven Asian Opportunities Fund, which is run out of Hong Kong.

In Asia, Ascalon is seeking out liquid fund strategies that will not overlap with its existing managers, says Chan. Last year it invested in Singapore-based Canning Park Capital, which runs a long-short equity fund, and also Athos Capital in Hong Kong, which launched an event-driven strategy in mid-April.

“We seek quality, and there is quality out there,” says Chan.

The establishment of its Hong Kong office is part of Ascalon’s aim to expand its business scope beyond Australia – a growth proposition that many of its peers aspire to.

“There is a bit of a movement in Australia to shift the funds management emphasis towards Asia,” says Triple A's Hatfield. “Seeing as we export to Asia, why shouldn’t Australian fund management teams invest in Asia?”