“Investors say they want to find a hedged product in Asia, but they don’t really. They come here for the sex and violence. They are here for an extra-normal return.”

Making this remark was the normally mild-mannered Paul Smith of Triple A Partners, speaking at an event in Hong Kong this week hosted by White & Case. Usually when we ask this question about what investors want, the answer ‘they want a hedged product’ is forthcoming. But we secretly think Smith could just be right.

Yet not everyone agrees with him. Sitting alongside was Ed Greene, chairman and managing director of Diamond Dragon Advisors, an Asian-based advisory and fund placement firm. “Alternative managers focusing on returns aren’t raising money,” he says. “It's those who are focusing on risk mitigation that are getting the ear of investors.”

The specific strategy interests of investors seem to fluctuate on a daily basis. David Goldstein, a partner at White & Case, pointed out that the demands for capital are coming from all corners of the Earth.

“Investors favour actively managed strategies like distressed and event-driven, ones which are uncorrelated to broad indices," he said. "Globally there is an enormous amount of interest in Brazilian, Latin and Central American strategies.”

Smith said that he had been speaking to a big Hong Kong hedge fund manager the previous evening who had told him that only 4% of his assets came from Asia-based investors.

The lion's share of money is still believed to be coming to Asian hedge funds from North American investors. It remains difficult to raise capital and allocations are being made with extreme caution and with far longer diligence times, a process that now extends to service providers of funds being placed under a spotlight before investments are made.

In the next edition of AsianInvestor magazine we investigate the hedge fund capital-raising scenario further, how investment bank prop desk spin-outs are whetting the appetites of prime brokers and how that theme, still in its early stages, is shaping up.

The panel, which was moderated by Anthony Wong of White & Case, was rounded out by Katherine Abrat of Goldman Sachs.