Asia Hedge Funds Soar

Terry Flanagan

Asia Pac is experiencing their largest amount of hedge fund activity since the financial crisis.

Existing and start-up hedge fund managers raised a total of $4.43 billion assets at year-end 2011 with start-ups alone raising a record near $8 billion, according to AsiaHedge, the highest amount of capital raised since the industry’s high of 2007, prior to the financial crisis of 2008.

Nearly 60 new hedge funds were launched in Asia, across the entire region, though Hong Kong, with 20 new funds (34%) and Singapore, with 17 new funds, still remain key hubs for alternatives. The average start-up went from $76.4 million; double that in 2010 at $40 million, according to Bloomberg.

The region’s start-up focus has been centered on Myriad Asset Management, the Hong Kong-based firm led by former Highbridge Capital executive Carl Huttenlocher, who was delayed last September by accusations of falsely valuing illiquid assets by Hong Kong regulators. The firm is on its way to reaching its initial target of $2 billion, up from just $300 million when trading began last December.

Myriad is on par with Azentus Capital, which held the title of largest Asian hedge fund throughout 2011, with a jump from $1 billion at launch to more than $ 2 billion after a few months of trading. Azentus’ head is Morgan Sze, an ex-Goldman Sachs proprietary trader. Both Azentus and Myriad are multi-strategy hedge funds.

Yet, much like much of the global hedge fund industry, Asia funds lost in the final quarter of 2011, experiencing outflows of $2.2 billion last fall, which erased the region’s gains made early last year, according to data provider, Eurekahedge.

As such, a high rate of liquidations was seen in the sharp decline of Eurekahedge Asian Hedge Fund Index (EHFI38), which lost 8.5% last year. Yet, compared to global performance, Asian remained up. Asian hedge funds, including Japan, only declined 5.2% from the start of Q4 2011 to year-end, versus a global decline of nearly 14% among emerging markets hedge funds, according to the Hedge Fund Research indexes.

Asia’s gains in a volatile market are largely attributed to a renewed interest for U.S. institutional investors. As is often the case in the U.S., large household-name institutions are commonly drawn to large household-name hedge fund managers.

“After a hiatus of almost two years, a few highly regarded traders and hedge fund managers finally succeeded in launching their own ventures last year, which gave many an international investors an opportunity to recycle or trade up their Asia allocations,” Aradhna Dayal, head of Asia HedgeFund Intelligence told Bloomberg.

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