Morgan Stanley hedge fund debutantsÆ ball: Shanghai redux

Hedge fund managers and investors return in bigger numbers than ever to the prime brokerÆs annual Shanghainese rendezvous.
Morgan StanleyÆs third annual Asian hedge fund investment forum took place on May 23-24, introducing hedge funds either starting up or launching new Asia-focused products to global investors at the swanky Shangri-La Pudong Hotel in Shanghai.

Last year, there were 43 managers at the event managing $7.2 billion; this year attracted 45 managers managing nearly $12 billion. Also there was a selection of global managers with an established presence whose global assets are $36.5 billion. All remain open with capacity to manage more.

The crisply managed shindig began each day with on-stage panel sessions. For hedge fund managers that lay claim to uncorrelated returns, their stated market views are remarkably uniform and nobody gets in a stew or generates controversy, but these managers are being showcased and being asked gentle questions, rather than grilled by their interrogators, all of whom are Morgan Stanley prime brokers.

Whilst one might critique conferences that are organized for profit, by virtue of bringing in volunteer moderators from firms and asking those bank clerks to play Larry King for a day, with predictable results, it is worth mentioning that nobody in Shanghai has to pay to come to this event, and Morgan Stanley covers all the costs.

The answers at the panel sessions were polished and well-articulated, with AbaxÆs Chris Hsu providing the lionÆs share of perfectly-intonated polysyllabic words and compound-adjectives. On the basis of a well-delivered stage performance, some attendees will make a beeline to that manager for the next step, the private meetings.

To get to the next base with the hedge fund managers, you have to have money. That is to say, you have to be an investor. Aptly enough, that distinction is made by virtue of a green-coloured pass. Journalist æobserversÆ with yellow passes are banned from the darkrooms. Your selected hedge fund managers are met in rotation, and the investors move from one manager to another when the hooters go off.

Investors may not want to write tickets on the basis of these meetings alone, but can determine almost immediately those hedge fund managers that they donÆt want to maintain a future liaison with. It is like blind dating, when you see someone for the first time and think, ôWith you: not a chance, not even in a million years.ö

ôWe never stop looking for and talking to new hedge fund managers,ö says attendee Stefano Prosperi, director of Hong Kong fund of funds Kairos Research. ôHowever, listening to fascinating people and giving them money are two entirely different things.ö

Investor attendance in 2006 represented $468 billion. This year there were 256 investors representing $612 billion invested in hedge funds. These included funds of hedge funds, asset consultants, pensions, institutional investors and family offices. Asia-based investors accounted for nearly half of the assets under management present.

ôIn 2006 Morgan Stanley prime brokerage in Asia took 57 funds live; in 2007 we have done the same for 47 new funds by the end of May, split to a large degree between Singapore and Hong Kong,ö says Kurt Baker, managing director and head of Asian prime brokerage for Morgan Stanley. He also served as master of ceremonies for the event with the assistance of his capital introductions expert, the genial Jim Fallon.

ItÆs a competitive process for managers even to secure an invitation to the conference. Yet not all the hedge funds presenting are Morgan Stanley prime brokerage clients. One event-driven fund, which was acclaimed by numerous investors as giving the best private presentation, is a client of another prime broker. ôWe do try to keep a very good relationship with Morgan Stanley and genuinely like the whole team,ö said the manager. ôIf they continue to show us the love, they will be top of the list when we get around to mandating a second prime brokerö.

With all this love circulating from investors and prime brokers, the Morgan Stanley debutants ball looks set to continue being the hot ticket in town for hedge fund managers.

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