RBC Dexia seeks to service more alternatives managers

Mike Coleman of the Alternative Investment Management Association says a growing number of credit and macro hedge funds are setting up in Asia.

The number of alternative managers in Hong Kong and Singapore is rising, and RBC Dexia expects more fund mandates on the wave of that growth.

The theme that service providers see this part of the industry as growing in momentum locally is echoed by Mike Coleman, chairman of the Singapore chapter of the Alternative Investment Management Association (AIMA). He says there has been significant uptake in new managers in Singapore over the past year, for several reasons.

"There has been a push factor," says Coleman, who is also managing director of Singapore-based commodity hedge fund Aisling Analytics. "Working for large investment banks has been particularly stressful in the turmoil of recent times and many have taken the opportunity to re-assess and work for themselves," he says, adding that some have lost their jobs.

He then refers to a "pull factor", whereby people tend to find opportunities following a market disruption. Recently in Asia, more alternatives managers than normal have set up hedge funds with strategies focusing on credit (in emerging-market bonds and structured products) and macro funds.

RBC Dexia is keen to further expand its activities to the alternatives segment in Asia, says Scott McLaren, head of Asia-Pacific sales and distribution in Hong Kong.

Both Hong Kong and Singapore have over the years been successful in attracting a large number of alternative and boutique fund managers choosing to base their activities out of Asia, he adds, estimating that there are about 700 hedge or boutique fund managers in the region.

Part of the reason for both centres doing so well is that they have been very active in creating an attractive environment for alternative fund managers, says McLaren.

However, such managers are not coming from Europe in large numbers, it seems. AIMA's Coleman says rumours of wholesale movements of hedge-fund managers from Europe to Asia is "more talk than action". But there have been larger numbers of individuals, such as graduates from business school, who have come to Asia looking for work, he notes.

Meanwhile, RBC Dexia has been able to attract more business as a result of institutional investors requiring more information and higher standards of due diligence, overall experience and capabilities, he says.

"There are government entities that invest in these [alternative] types of products and they need to meet quite stringent due-diligence standards, so outsourcing to a large global administrator is the route they are comfortable with," he says.

(Recent surveys from Russell Investments and State Street, among others, indicate that institutional investor appetite for alternatives is rising, as it is among high-net-worth individuals.)

Moreover, the strategic viability of the administrator is even more important now, post-financial crisis, McLaren says. It is now typical for a fund manager or large investor to dig deeper and get information on the parental structure and to consider the recommendations of the rating agencies, he says.

Fund managers who were holding cash during the crisis were quick to diversify counterparty risk across a number of institutions, says McLaren.

He suggests that the growing number of hedge-fund managers based in Asia and selling their strategies into the region would find an Asia-based full-service provider to be the best fit.

Managed-futures fund provider Superfund takes this view, having last month chosen RBC Dexia to provide fund administration, custody and shareholder registry services to five master-feeder funds being marketed to Asian investors.

However, despite the new hedge-fund rush into Asia, McLaren notes there has been a high attrition rate over the years. He says RBC Dexia focuses on those with a track record and a decent asset size from $50 million to $100 million to start with.

Moreover, fund approvals and registrations are starting to pick up slowly again as approvals almost ground to a halt during 2009. There are a growing number of exchange-traded funds, for example, with existing fund managers adding to their suite of products trying to capture the demand.

"This market is very efficient -- people respond very quickly to demand," says McLaren. "If you want the mandate, you have to be there ready with the right product."

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