By Aradhna Dayal
In sync with the
sultry summer that June unleashes in Asia, the buzz around
several marquee billion-dollar launches is heating up the hedge
fund scene in the region. Whether it is Carl
Huttenlocher’s much anticipated Myriad, Seth
Fischer’s Oasis, Morgan Sze’s Azentus
or even the highly secretive China-focused Principia, investor
expectations from these new-age, institutionalised funds are
Adding to the excitement is the rapid scaling up of a
handful of seasoned, second-generation managers such as Danny
Yong of Dymon Asia, John Ho of Janchor Partners, Gen
Kato’s MAM, Prime Capital and Nick
Taylor’s Senrigan. In the past year, all these
funds have reached $1 billion and are soft- or hard-closed.
Together these two sets of new entrants have given rise to
Asia’s first true blue, indigenous (post-crisis)
Billion Dollar Club – a watershed event AsiaHedge has
been predicting since the advent of the highly promising
start-up class of 2009.
However, instead of a feeling of euphoria, I sense a certain
caution among the investor community. The million-, or should I
say, billion-dollar question it seems to be: can a
billion-dollar book be effectively deployed in Asia and can
these managers continue to glean the alpha that they generated
over a much lower asset base? Are the Asian markets deep and
varied enough to sustain investments of this magnitude or will
it result in a disappointing tapering off of performance that
takes away the edge from Asian investing?
In short, the billion-dollar book – is it a boon or
a bane in Asia?
Sitting in Asia, we would very much like to believe that it
is the former. One only has to look at the soaring trading
volumes, growing market capitalisations and listing of global
companies in the Asian equity markets, to realise the
investment opportunities they are unleashing. Add to that the
emergence of a true multi-strategy approach now in Asia (as
against mainly long-biased equity funds earlier) – a
route several of the billion dollar-plus Asian hedge funds are
now taking – and it is clear that there is enormously
greater flexibility and opportunities for returns than before.
As these funds start combining CBs, credit, rates, FX, equities
and even activism to switch across asset classes and generate
alpha through market cycles, it automatically builds in
additional capacity that simply could not have been
contemplated five years ago.
A look at the Asian FX and rates markets tells a similar
story. The FX market in Asia has grown between seven to 10
times over the past five years and trading volumes (estimated
at around $400-600 billion a day at present) have skyrocketed.
There are also now several Asia-based macro funds trading
global currency markets (hence widening their universe), making
it entirely possible today to produce healthy 15-20% returns
purely from trading Asian currencies. Dymon Asia, which is up
14% year to date, is a classic example.
An acceleration in M&A and corporate activities is also
opening up huge investment opportunities, particularly for
event-driven funds. Asian governments have also fostered a
credit culture to deepen local debt markets, which has been a
boon for fixed-income focused Asian hedge funds. Plans to
develop newer avenues such as an integrated regional market for
local currency bonds will facilitate greater scale, efficiency,
and access for many of the region’s fledging bond
Finally, firms such as Janchor Partners have led the way for
taking in only long-term, committed capital, which gives them
the luxury of deploying a large asset base for the long
Allocators will also likely tweak their yardsticks to better
reflect the changing dynamics in Asia. There is little doubt
that a $2 billion fund generating 10% per annum cannot be
compared to a $50 million fund returning 40%. A higher focus,
therefore, on asset-weighted returns as well as the longevity
of the brand, overall business and performance, will likely
become the norm.
Reflecting this theme, we bring you news and features on
Fortress, Charlie Chan, Oasis and Sparx – players
managing large portfolios in Asia – in this issue of
The June issue also carries a synopsis of our latest
Roundtable, titled 'Going global: Singapore’s
evolution as a key international hedge fund hub’,
which brings together some of the sharpest minds in the Lion
City’s hedge fund arena. Finally, a special
feature on China showcases some of the newest opportunities in
that market today. Happy reading.