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Asia Pacific Intelligence

Hedge fund industry news for September

Tuesday, October 01, 2013

AUSTRALIA

Opalesque reported on a number of developments in the hedge fund industry in Asia.

Other stories included the news that the Aussie State Super Financial Services fund is to invest $200m into hedge funds. Select Asset Management also said that alternatives were becoming increasingly popular in Australia.

CHINA

It was reported that six global hedge funds are set to secure the first approval to raise money from institutions within China for investing overseas, a key reform in the opening of the country's closely guarded capital account. It is believed that Shanghai has granted an overall quota of $300m that will be divided equally among six foreign funds - Canyon Partners, Citadel, Man Group, Oaktree, Och-Ziff and Winton Capital - with each permitted to raise up to $50m.

HONG KONG

A report from the Chicago Tribune and other sources claimed that Goldman Sachs Investment Partners and Cong Li, the former chief investment officer of Mirae Asset Global Investment (Hong Kong), are preparing to start separate Asian hedge funds.

Goldman is raising money for Oryza Capital, an Asia-focused long/short equities hedge fund it set up this month, according to a document seen by Reuters. The fund is believed to have initial capital of $80m million. The Oryza 14-member team is led by Goldman partners Hideki Kinuhata in Tokyo and Hong Kong-based Ryan Thall who will focus on mid and large-cap stocks.

Separately, Cong Li is setting up Zenas Capital Management in Hong Kong and will invest in Greater China stocks, a hot performing region for hedge funds this year. Li left Mirae in July where he managed more than $9bn. Reuters reported that he will launch the fund in mid-October and expects to raise more than $100m in the next year.

Background to Li suggests he is among the first generation of Chinese fund managers, dating back to 1998 when China's mutual fund industry started. He moved to Mirae Asset in 2006 from Hamon Investment Group in Hong Kong. Before that, he worked at Hua An Fund Management Company in Shanghai between 1998 and 2003. Jason Jin, a junior portfolio manager and investment analyst at Mirae Asset, has also joined Li.

Despite the MSCI China share index falling 7.6% through to end August 2013, hedge funds investing in China shares gave an average return of 8.8% during the period, according to data from industry tracker Eurekahedge, raising hopes for capital inflows into such funds.

KOREA

Business Korea reported that Franklin Templeton is bringing a fund of hedge funds product to Korea in 2014.

The paper quoted a Franklin Templeton representative as saying: "K2 Advisor, which has US$8.7bn [9.4tln won] of fund capital, is preparing to launch a hedge fund next year," said Franklin Templeton personnel on September 12. According to Institutional Investor data, it is ranked 19th in the global market of funds of hedge funds. K2 Advisor is mainly targeting Korean institutional investors.

Separately, the Business Korea piece referred to the Baekdu 1st Hedge Fund, released on September 17 2013 by Brain Asset Management, which has recorded a rate of return of 25.7% as of the end of August. Brain Asset Management is reportedly the largest Korean hedge fund while the combined amount of the hedge funds issued by Korean firms has topped 1.5tln won (US$1.4bn) recently in two years and nine months.

Global Post reported that South Korea's pension funds diversified their investment portfolio in the first half of 2013 from a year earlier, data showed Thursday, in an apparent bid to tackle falling returns from equity assets.

The publication wrote that according to the data from the Korea Capital Market Institute, the size of alternative investments in the National Pension Service (NPS) came to 36.9 trillion won (US$34.3bn) at end-June, up 11.8 percent from last year. In this case, alternative investments refer to non-equity assets, which include property assets, social overhead capital, private equity funds and hedge funds.

The number marks a steep rise compared to a 3.5% and 1.8% gain in stock and bond investments, respectively, over the cited period. The NPS is the country's largest institutional investor.

Market watchers said the increase in the size of alternative assets came as local pension funds suffered a decrease in their investment returns as the country has landed into a slow-growth pace amid low interest rates. The Korea Teachers Pension (KTP), a fund for private school personnel, also expanded their investment on alternative assets by 7.7% over the cited period, and the Korea Teachers Credit Union (KTCU) held a comparable figure of 12.4%.

The portion of such assets in the NPS's portfolio came to 9.2% this month, while those of the KTP and the KTCU came to 14.1% and 23.8%, respectively.

PAN ASIA

A report from Investment and Pensions Asia finds that Asian hedge funds are at the crossroads of performance and relevance.

An investor in the S&P500 since 2009 would have made a return of 76.3% (excluding dividends); a return of 45% in 2010, 29.33% in 2011 and 28.64% in 2012, according to the data service S&P Capital IQ. Since 2010, the average equity hedge fund has produced returns (after fees) of 14.5%, according Hedge Fund Research Inc. Such underperformance along with the major regulatory changes has profoundly affected the way returns are made and clients are serviced, the piece says.

VIETNAM

International Adviser reports that one of SE Asia's biggest asset managers has launched an actively-managed Ucits equity fund designed at international investors wishing to gain exposure to Vietnam's public equity markets.

Dragon Capital's Vietnam Equity Ucits, which is being overseen by an all-female board, seeks medium to long term capital appreciation through investing primarily in securities issued by Vietnamese companies that are traded on the Ho Chi Minh City Stock Exchange.

 
This article was published in Opalesque's Asia Pacific Intelligence our monthly research update on alternative investments in the Asia-Pacific region.
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