Launches highlight HK's role as hedge fund hub

Demand for Myriad's second fund spurs launches as evidence shows more Asia-focused funds are managed in Asia. At the same time global macro's revival bodes well for Singapore.
Launches highlight HK's role as hedge fund hub

Investor interest in Myriad Asset Management's second fund shows how far Asia-based hedge funds have come since the firm launched its first fund with $300 million in 2011.

Fundraising for the Myriad Japan Reflation Fund Limited started in February this year and several sources report very strong investor appetite for it, in part due to pent up demand for Japan-focused hedge funds. It has a $2.5 billion target, which would be eight times bigger than Myriad's first fund.

That demand appears to have spurred a raft of Hong Kong-based but Japan-focused hedge fund launches this year – ranging from the Senrigan Japan Opportunities Fund to Taizen Offshore Fund.

These launches highlight Hong Kong's growing role as a hedge fund hub in the region. Figures from HFR show a rising trend for Asia-focused, China-based hedge funds, led by those managed in Hong Kong.

More broadly, more Asia-focused hedge funds are being managed out of Asia. Last year, Asia-based and focused hedge funds accounted for three quarters of Asia-Pacific focused hedge fund launches, up from just over half in 2010.

That trend is underpinned by stronger performance demonstrated by hedge funds based in the region than those outside it.

Data provider Preqin calculates higher Sharpe ratios for Asia-Pacific based hedge funds based in the region than all global competitors since the end of 2014, thanks to a combination of strong performance and relatively low volatility.

Furthermore, Asia-Pacific-focused hedge funds based in the region have posted more than double the returns of similar strategies from firms based outside for the last three years running, and also in 2009, by Preqin data.

Net returns for the former were 44.33% in 2009, 15.1% in 2012, 14.04% in 2013 and 10.17% in 2014. The equivalent figures for the latter were 21.16%, 7.25%, 5.96% and 3.70%.

The reasons commonly given for the disparity are that Asia-based managers have access to better information, combined with the fact that strategies managed outside the region have tended to have a greater focus on global macro, which have underperformed over the last three years.

However, global macro has been outperforming so far this year. HFR's macro index gained 3.4% in the first quarter of this year – ahead of equity hedge (2.3%), event-driven (2%) and relative value (1.7%), according to figures released by the data provider late last week.

This year's strong global macro performance should help Singapore's bid to revitalise its hedge fund industry. The city-state is home to a higher share of macro funds than more equity-focused Hong Kong.

Interestingly, Singapore sovereign wealth fund GIC has seeded a global macro fund run by its former CIO, Ng Kok Song, at Avanda Investment Management. Fundraising for the multi-billion-dollar fund is expected to be completed in the second quarter of this year.

At the same time, Temasek's joint venture with Dymon Asia Capital – set up last year to seed start-up hedge funds – has already seen three hedge funds launch on the platform that form part of the Dymon multi-strategy fund.

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