Thu, 24/07/2014 - 18:00
China’s burgeoning hedge fund industry has the potential to rival that of the US and become one of the world’s largest, according to the regional head of the CFA Institute.
AAM reports that Paul Smith, managing director of CFA Institute’s Asia-Pacific operation, said that the Chinese hedge fund market has been valued at about US$40 billion, making it the largest in Asia. While the MSCI China Index remained flat last year, hedge funds investing in Greater China gained an average of 20%.
“It’s growing very rapidly, although not many people focus on it because it’s entirely domestic at the moment in terms of its investments and also in terms of the investors within it,” Mr. Smith said during a CFA Institute event in Hong Kong. “We believe though, as do our members in China, that the hedge fund industry is going to be a driver of not just the Asian hedge fund industry, but the global hedge fund industry over the years to come.”
Smith said that in its present state, China’s hedge fund market resembled that of the US industry during its salad days 30 to 40 years ago. “It’s very similar and largely unregulated with lots of pockets of high-net-worth individuals, who really have no credible investment alternatives. So, the hedge fund industry for them represents an opportunity to increase their own market. The regulatory environment in China is also obviously very benign, which is interesting,” he commented.
As the 22 July 2014 authorization deadline for the AIFMD approaches and the majority of hedge fund managers (59%) think that the AIFMD will have a negative effect on the hedge fund industry according to new research from Preqin (based on a survey of 150 hedge fund managers), compared to 53% in December 2013 and 29% in December 2012. A further 22% think it will have no impact and only 20% think it will have a positive impact.
US-based hedge fund managers are the most negative towards the AIFMD, with 71% stating it will have a negative impact on the industry. In contrast, Europe-based managers, excluding those in the UK, have the most positive outlook towards the Directive, with 40% of these managers stating they think it will have a positive impact on the hedge fund industry and only 45% stating they think it will have a negative impact.
The largest proportion of hedge fund managers (43%) named compliance costs as their primary concern regarding the AIFMD. Europe-based managers, excluding those in the UK, were the most concerned about compliance costs, with 53% stating this as their primary concern.
No fund managers surveyed reported that the costs of regulation were lower than expected, and cost exceeded expectations for three-quarters of fund managers in Europe, and in Asia and Rest of World.
Managers based in Asia and other countries outside of the US and Europe are most concerned about compliance costs surrounding the AIFMD (39% of these managers named this).
Linedata has recently signed ten new hedge funds clients globally and has seen strong momentum in its front-to-back deals so far in 2014.
These funds trade alternatives and represent alternative subsidiaries of global institutional banks and asset managers as well as a number of start-ups handling between USD710 toUSD1120 million in AUM.
“The impressive growth in the hedge fund space reiterates the strength of Linedata Global Hedge. The momentum that Linedata is currently experiencing is an endorsement that affirms our offering is strong and well placed to meet business requirements now and in the future,” says Gary Brackenridge, global head of hedge funds at Linedata.
Sally Crane, managing director at Linedata Asia, says: “We are delighted to welcome eight of the ten new hedge funds to Linedata Asia based on recommendations from our existing clients. Understanding and meeting the needs of our clients is a priority for Linedata as well as working in partnership. Recent investment into permanent client services and support gives our clients assurance that we are delivering not just a solution but also the customer service that they require.”
Hong Kong hedge-fund firm Azentus Capital Management Ltd., run by former Goldman Sachs Group Inc. proprietary trader Morgan Sze, bounced back in the second quarter after a "difficult" start to the year, according to an investor letter seen by The Wall Street Journal.
WSJ reports that the multistrategy Azentus Global Opportunities Master Fund returned 2.29% net of fees in the second quarter, according to a letter that was circulated Thursday to investors. It remains down 3.28% year to date, however, after sliding more than 5% in the first quarter. By comparison, the MSCI Asia ex-Japan stock index was up 3.1% in the first half of 2014.
The performance of hedge funds was broadly disappointing in the first quarter as managers saw widely held bets such as technology stocks and Japanese shares suddenly sell off.
Investments in Greater China stocks drove the fund's gains in the second quarter. Hong Kong conglomerate Hutchison Whampoa Ltd. which Azentus added to its portfolio in December, was among the winning bets as its shares surged 10% in the quarter. Azentus managed roughly USD750 million as of June.
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