AsianInvestor and Clifford Chance have unearthed a discrepancy about attitudes in the region towards hedge funds.

Our recent poll of institutional investors, fund managers, business executives and service providers finds a general expression of revulsion at hedge funds. One question asked respondents what three asset classes would attract investor assets in the coming 12 months. Only 3% ranked hedge funds as the most likely asset class -- compared with, say, distressed/opportunity funds, debt capital markets or equity capital markets.

When adding up people's second- and third-place rankings, hedge funds and funds of hedge funds came well below these other classes, and below private equity.

We also asked "Do you think the hedge fund industry will change?" to which 91% said "yes". We asked how, and most responses involved reduced performance and management fees, and making strategies more liquid.

Yet other questions suggest that investors will want the thing that hedge funds provide: absolute returns. We asked people what strategy would see the most inflows in the next 12 months for both equities and for bonds: ETFs, passive, unlisted/private, active management or active absolute return. For equities, active absolute returns won the most votes (30%); it came in second for fixed income with 33% (active management was the post popular strategy for bonds).

"People still want the panacea of absolute returns," observes Mark Shipman, funds partner at Clifford Chance. "They want to be able to make money in all environments. But if investors are not accepting of hedge funds, it's not clear what investors would do to obtain absolute returns otherwise."

AsianInvestor and Clifford Chance appointed Ipsos to conduct a survey, online and through interviews, with industry professionals around the world. The survey took place during the week of March 9.

We received 214 complete responses, with 39% coming from independent or affiliated asset management companies, 17% from service providers to the buy-side, 11% from distributors of investment products and 10% from institutional investors. The majority of respondents were based in Hong Kong or Singapore, with a roughly similar distribution from other regional markets.

Of this group, 41% were senior managers or partners, while 27% were in sales/business development and 11% were analysts or portfolio managers.

The full survey results appear in the April edition of AsianInvestor magazine.