Consolidation activity is forecast for China’s cement and bottled beverage industries, and hedge funds and investment banks are scouring for possible mergers in those sectors, according to London-based research and consulting house Copal Partners.

Joel Perlman, co-founder and president of Copal, notes that margins are tightening in these sectors particularly. “There will also be merger activity in bottled drinks, given concentrated distribution channels,” he says.

Copal is also undertaking work for various types of hedge funds in its Beijing office. These are mostly based in Singapore and Hong Kong, and strategies range from long/short equity to macro, as well as quant funds.

“One of the key trends to emerge is the proliferation of alternative investment vehicles, as more and more hedge funds look within China for investment opportunities,” Perlman says. Chinese investors are allocating more capital to alternative products, he adds.

Regarding commodities, Copal recently undertook work for Chinese firms mapping out the supply of raw materials from Africa, such as gold and manganese.

Copal, which lists Citi, Deutsche Bank and Bank of America Merrill Lynch among its shareholders, reports its revenue has been growing at between 20% and 30% annually in Asia over the past three years.

Perlman adds that Copal’s business model has profited from an increasing trend among investment banks and asset managers to outsource services.

In most cases, it undertakes what he refers to as “junior analytic” work, including fundamental research on local equities, mergers & acquisitions, and preparation of initial public offering memoranda.

But Perlman denies that this is an example of banks further ‘unbundling’ what were once core services. “What we do is not really unbundling,” he says. “Copal is not an independent research house writing reports which are then sold on to a number of clients.”

Copal organises separate teams to work on specific projects for individual clients. Compliance requirements mean research teams are inspected regularly to make sure information is not shared between clients.

The firm’s biggest base in the region by far is India, where it employs some 1,150 people, giving it a larger presence than some of the institutions it serves.

Perlman says he is bullish on India, noting that the country is less reliant on exports than China. “The government is running enormous infrastructure programmes, which will stimulate growth, although inflation is a concern,” he says. Salaries in India have surged recently in a way not seen since 2005-2006, he adds.

Copal opened a Beijing office in April 2009, which is now staffed with 50 people. When asked who runs the office there, Perlman was tight-lipped, saying he wants to avoid giving recruiters information on his teams.

And more China offices could follow. Copal says it is evaluating additional research centres there in partnership with certain clients.