What a difference a year makes: Asia is back on a roll

So far this year Asian hedge fund managers have comfortably outperformed their counterparts in the US and Europe

October is a beautiful month in much of Asia – making it a great moment to be in, and to travel to, the region.

It is also the time when the Asian hedge fund industry comes together to celebrate the performance of the best Asia-Pacific managers at the annual AsiaHedge Awards gala dinner in Hong Kong.

For the first time this year, the evening of recognition and celebration will follow immediately after the AsiaHedge Forum during the day – the annual industry get-together that also brings together key managers, investors and counterparties to tackle the big themes, issues, challenges and opportunities facing the industry and the wider world.

The combined event will make for an enhanced one-day networking and information-sharing occasion – and one that shines a spotlight on the Asia-Pacific hedge fund industry at a time when there is plenty to celebrate.

First, and foremost, performance has been on a major upswing this year. Compared with the situation of 12-18 months ago, when the industry was mired in gloom amid a wave of redemptions and drawdowns, the industry is on the front foot again – delivering results for investors, growing in size and diversity, and expanding into new products and new strategies.

This year’s performance has seen a fairly spectacular turn for the better – with equity-based managers across the board, but particularly those focused on China, India and Japan), generating impressive returns in the first three quarters of the year.

There are myriad reasons for Asia’s $300 billion hedge fund industry to be celebrating this year. Unlike last year, when most managers and investors were awash with fear and concern, most industry participants are feeling confident and optimistic again.

That is notwithstanding an array of politico-economic concerns regionally and globally – including the simmering tension around North Korea, the potential implications of an impending Brexit and the prospect of further US rate hikes before the end of the year.

Buoyed by this improved environment, there are a number of exciting new fund launches continuing to come to market – including those of Ovata Capital, under former BlueCrest equity trader James Chen, and Poincare Capital’s global equity long/short fund led by Lu Yang, the ex-CIO of China’s SAFE Investments.

So far this year Asian hedge fund managers have comfortably outperformed their counterparts in the US and Europe – bringing renewed attention from global investors, as we detail in this edition.

Several experienced global allocators – such as Mark Yusko, the founder of Morgan Creek – have confirmed their revived interest for Asia strategies given their strong contribution to overall portfolio performance this year, while a number of industry surveys have pointed to Asia as one of the highest growth areas in terms of investor allocations.

Meanwhile, AsiaHedge’s most recent asset survey also showed that some 50 hedge funds either based in Asia or focusing on Asia are now members of the Global Billion Dollar Club of managers with at least $1 billion in assets.

Furthermore, there is a formidable cohort of some 400 mid-sized firms that manage assets between $100 million and $1 billion – which puts them in the ‘sweet spot’ as far as many allocators and institutions are concerned.

So it is clear that the Asia-Pacific industry is on a powerful growth trajectory again – and that should create a strong backdrop for this month’s AsiaHedge Awards and AsiaHedge Forum, which will be attended by leading regional and global managers and investors.

That is good news not just for Asian hedge funds – but also for funds of funds specialising in Asia, which can act as a critical link for large institutions looking to allocate to hedge funds in the region.

At a time when there are some heavyweight allocators looking to gain exposure to Asian managers – whether they be Middle East sovereign wealth funds, Japanese pension funds or whoever – the added value and the know-how that funds of hedge funds can bring to the table in Asia are immense.

AIMA Japan chairman Ed Rogers points out that large Japanese institutional investors such as pension funds are looking to put billions of dollars to work with hedge funds, as these kinds of institutions start to see the wisdom of investing in alternative strategies that can provide new return streams and more diversified portfolios.

For big investors such as these, the due diligence expertise of funds of funds can be a big help in allocating money to alternative managers. “When you are a $20 billion sovereign fund in the Middle East and you want to access Asia, you do not want to have to meet every single $50 million manager,” he says. “But with the help of a fund of funds you can easily invest your $500 million to managers.”