Sustained investor interest has generated a new generation of Asian hedge funds based on relative value and country-specific strategies, according to a research report from Eurekahedge, a Singapore-based data provider. Until recently, an overwhelming majority of Asian-focused funds were multi-country and followed long/short strategies. Yet in the last three years, India and Taiwan have accounted for the bulk of new funds launched in the region, while strategies that experienced the most asset growth in 2005 were those employing relative value strategies, the report says.
In 2003, 2004 and 2005, India-focused hedge funds grew at a clip well over 100%. Taiwan-focused funds doubled last year and in ’03, while increasing by a 50% gauge in ’04. By contrast, broader Asia-Pacific funds grew only about 20% last year, roughly 50% in ’04 and around 25% in ’03, while Asia ex-Japan’s growth clustered around the 20-25% mark each of the last three years. China-focused funds also outpaced the broader Asian mandates, but their growth has decreased each of the last three years.
“We also expect more hedge fund launches in Korea in the coming year, as the Korean economy has investors interested with its robust growth in 2005 and its bright outlook for 2006,” says the report. Start-up activity has also picked up steam in Japan, as the markets there entered an expansionary cycle during the latter part of the year on the back of a pro-active government. Japan saw some 40 new fund launches in 2005, taking the total number of funds operating there to over 200.
Long/short equities funds continue to represent the dominant strategy among Asian-focused funds, accounting for 62% of the funds and 69% of the assets under management. Despite leading all strategies in growth, relative value still only accounts for 2% of assets of Asian hedge funds. Multi-strategy is the second-largest after long/short, corresponding to 10% of assets. Distressed debt is a distant third with 5%, followed by arbitrage (4%), CTA/managed futures, event-driven (3% each), fixed income and macro (2% each).
Shared of Asian Hedge Fund Assets by Strategy