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 running high.
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
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
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 funds.
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 AsiaHedge.
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.