The Australian hedge fund community is a sophisticated marketplace with tremendous talent. Many of these managers are ex-pats who have worked overseas in New York, London or Asia and have come back home for lifestyle or family reasons. At the moment, around 90 Australian hedge fund managers offer over 240 funds, and 2010 was a good year for them, returning on average 10% against a flat ASX200. Because they are overlooked, sometimes even by the local investors, there are some good opportunities. These funds would certainly be able to raise substantial amounts of assets in the U.S. or Europe with the same quality individuals.
Recently, both international investors and local Australian investors like the large “super funds” have begun to allocate more to Australian hedge funds. This is seen as a major shift and stamp of approval for Aussie managers, given that historically most of the allocations from the larger supers have gone offshore. In addition, Australian high net worth individuals and family offices are starting as well to include more domestic hedge funds in their asset mix.
By now, Australian hedge funds deploy a large range of strategies. Out of the seven hedge funds set up in 2010, only one of them was Australian equity long/short and the others were all either merger arb, global macro or had an Asia-Pacific focus.
Some Australian Superannuation funds shift assets from “mega” hedge funds
The Australian superannuation sector is the fourth largest and fastest growing global pool of pension assets. Employers have to contribute 9% of all wages, salaries, or earned income by law into a registered superannuation fund. Some of the super funds have up to 10% of their assets in hedge funds, and have started to use them to run more of their equity bucket in the hedged format, which could be a trend with large implications going forward.
Some superannuation funds have started shifting assets from large “mega” hedge funds into smaller and emerging managers. And not all of them request a five year track record. For example, the Sunsuper funds was a third month investor in a New York based credit fund and even seeded another credit fund. As a consequence, superfunds report a heavy traffic from offshore hedge funds coming to Australia for marketing over the last 18 months. This Roundtable offers invaluable insights what the “supers” are looking for.
One-third (by value) of all superannuation money is now self managed and held in what is called a Self Managed SuperFund or SMSF. The high net-worth and educated investors want to manage their retirement funds themselves, this pool of money that constitutes an unique opportunity for money raising for Australian hedge funds. With the right set up and distribution, hedge funds can also market to Australian retail through financial planners, which can be “at least as good (educated) as the best people from offshore fund of funds”.
The 2011 Opalesque Australia Roundtable was sponsored by Australian Fund Monitors and took place March 2011 in their Sydney office with:
Bruce Tomlinson, Portfolio Manager, Sunsuper Superannuation Fund
Chris Gosselin, Founder, Australian Fund Monitors
John Corr, Chief Investment Officer, Aurora Funds Management & Founder, Fortitude Capital
Dereke Seeto, Managing Director, Credit Suisse
Phil Carden, Portfolio Manager, Supervised High Yield Fund
The Roundtable discussion also highlights:
How to crack the Australian institutional market
Asset allocation, manager selection process of a leading superannuation fund and what hedge fund strategy the institution is interested in
How important is “marketing” for a hedge fund? What is the “right” kind of marketing? Investors warn what types of marketing is a read flag for them...
How Australian hedge fund managers overcome the “tyranny of distance”
Why investors in the Supervised High Yield Fund count amongst the most financially literate in all of Australia
“My bills cannot wait for the market to rally”: why alternatives and hedge funds should be in every portfolio
We also thank the 2011 Roundtable Series sponsor Custom House Group for their support. Enjoy “listening in” to the Opalesque 2011 Australia Roundtable!
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