Fri, Jan 20, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Asia Pacific Intelligence

Preqin says growth in Asia Pacific credit market should create opportunities for credit hedge funds

Monday, July 08, 2013

A new study from Preqin finds that the Asia Pacific hedge fund industry is dominated by long/short equity hedge funds. The study reveals that these types of funds make up over 40% of the funds managed by hedge fund managers from the region, while various forms of credit-based hedge fund strategies combined, such as long/short credit and fixed income, make up only 19% of the funds in the region. However, the study finds, as the Asia Pacific credit markets continue to mature, opportunities abound for the region's hedge fund industry to further expand into the credit space.

The report says: "Asia-Pacific credit markets are poised for another vibrant year, with factors that drove the record-breaking credit issuances in 2012 still in place. Interest rates remain low in the region, and governments such as China are moving to reform their credit markets in order to support their development. Corporate credit and high yield are also expected to remain high and are widely anticipated to be the next growth engine of a deepening Asia Pacific credit market. An expansion of the region's credit markets will mean ample trading opportunities for credit-focused hedge funds in the region."

Investors in the Asia Pacific region remain yield hungry which on top of increased trading options is another driver for fund managers.  "An expansion of the hedge fund industry into the credit space will provide investors with an opportunity to diversify away from holding just equity-focused hedge fund strategies, and will thus drive demand for credit-based hedge fund strategies" the study says.

Preqin's research finds that despite the booming Asia Pacific credit markets, the majority of investors (89%) prefer to maintain a global outlook when investing in credit hedge funds. Some 53% of investors maintain an interest in the North America region, while 48% will look to gain exposure to Asia. Strategically, the majority of investors in credit-based hedge funds prefer investing in long/short credit funds (45%), followed by fixed income arbitrage (30%) and fixed income (21%).

When looking to invest in credit-based hedge funds, investors in the region have a strong preference for investing in commingled direct hedge funds, with over 80% of the investors showing a preference for the fund structure. This is followed by commingled funds of hedge funds (50%) and direct managed accounts (14%).

A disappointing finding for the study is that though the Asian credit markets do provide abundant trading opportunities, fund managers looking to set up new funds and to fundraise in the region will do well to note that 63% of these investors in the region will not provide seed capital to new funds. However, they are more open to investing with emerging managers, with 57% of them being open to investing with managers with trading experience of three years or less. Some 60% of investors are also open to investing with spin-off managers. As such, fund managers will do well to build up a track record before opening it up to outside investors.

With strong institutional investor interest and favorable macro-economic factors driving the industry, conditions are ripe for the Asia-Pacific hedge fund industry to further mature and expand into the credit space, the study concludes.

This piece first appeared in Opalesque's Alternative Market Briefing.

 
This article was published in Opalesque's Asia Pacific Intelligence our monthly research update on alternative investments in the Asia-Pacific region.
Asia Pacific Intelligence
Asia Pacific Intelligence
Asia Pacific Intelligence
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - This hedge fund made 37% betting on banks in 2016 and remains bullish after the Trump rally, Hedge fund legend David Einhorn is making a big bet on GM, After impressive 85% return in 2016, hedge fund looks to Canadian gold producer, small banks[more]

    This hedge fund made 37% betting on banks in 2016 and remains bullish after the Trump rally From Forbes.com: Can bank stocks continue to rise after a 28% surge in the KBW Bank Index in 2016, fueled by a post-election rally as stock pickers returned to the beaten down sector? Forget the s

  2. SWFs - China sovereign wealth fund CIC plans more U.S. investments[more]

    From Reuters.com: China Investment Corporation (CIC), the country's sovereign wealth fund, is looking to raise alternative investments in the United States due to low returns in public markets, its chairman said on Monday. CIC will boost its investments in private equity and hedge funds as wel

  3. Some hedge funds strong start in 2017 nice contrast to 2016[more]

    With the 2016 HSBC Hedge Weekly performance rankings in the books - a year in which the same leader-board entries pretty much dominated unchallenged throughout the year - comes a new leader board that is a hard-scrabble mix of hedge fund styles and categories. What is clear after but a few short wee

  4. Macro hedge funds and CTAs outperform in December on strong dollar[more]

    Komfie Manalo, Opalesque Asia: The last month of 2016 saw risk assets climbing higher, as part of expectations that the new U.S. administration will remove barriers to growth and investment, Lyxor Asset Management said. December also saw the Fed hik

  5. Opalesque Exclusive: Roxbury credit events UCITS gathers more assets[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: The Roxbury Credit Events Fund, launched in September 2015, was up 4.24% in 2016, having returned seven positive months during the year. The managers raised