By Aradhna Dayal
In Asia, a new
trend is quietly but firmly taking shape: a handful of the mega
Asian hedge fund shops, particularly those that have crossed
$500 million in assets under management and have built
institutional infrastructure, are contemplating a move toward
becoming multi-talent/multi-strategy shops or
These mega funds, many of which have hard- or soft-closed
their flagships funds over the past year, view this as a
strategic move: the platform model could well be the next
critical step in their growth trajectory and catapult them into
the same leagues as many of their highly successful global
counterparts that run multibillion dollars in a range of
strategies or managers.
Virtually all the platform aspirants I speak to prefer to
keep a low profile on their plans as of now, so as not to
rattle investors or peers in the industry. However, they
confess that the massive churn being seen in the Asian hedge
fund industry currently is throwing up not just challenges but
also major opportunities, and adopting a quasi-platform or
multi-talent model positions them for both.
Their rationale? Well, if you are one of the very few $500
million-plus hedge funds in Asia that have cleared the lengthy
due diligence process of institutional investors, and if you
have the resources to support cutting-edge infrastructure,
there is no reason why you should not add new managers or
strategies, in particular if your investors trust you and are
keen to allocate more to you.
Bringing on additional managers has multiple benefits: it
can be done at a marginally incremental cost, and presents a
textbook case for funds to consolidate their AUMs and augment
business at a time when business sustainability has emerged as
a key concern.
Second, the extensive consolidation being seen in the Asian
hedge fund industry and the closure of bank prop desks has
unleashed a plethora of talent in the market, and for many of
the established Asian shops there is no better way to bring
that talent on board than via a well-oiled platform.
However, the path to a successful platform model can of
course be treacherous. A key question these
managers-turned-platforms will have to ask themselves is
whether they have the ability and managerial bandwidth to
manage multiple PMs and transition to a new business model.
Then there is the question of convincing the investors: it is a
well-known fact that the fastest way to lose investors today is
by diluting your investment focus or deviating from the
originally stated investment strategy.
What then can be the most optimal solution for Asian
managers wanting to expand their remit? From my recent
conversations with some of these managers, it appears that this
is best done when demand-driven, taking the shape of a joint
venture, or specially crafted deals between the manager in
question and an institutional investor where there has been a
This way, if the investor is ready to allocate to a
particular strategy in Asia but wants to deal with a trusted
entity, the manager uses its platform to bring on board a new
PM with specialised skills in that strategy. After a successful
incubation, that strategy can be spun off as a separate fund on
the platform, or run under its master fund. While this is quite
a popular seeding method globally, it is yet to become
widespread in the still rather boutique-based and fragmented
Asian hedge fund industry.
While it is premature to name who these
multi-talent/quasi-platform aspirants will be, what we can say
is that many of them were present at the glittering AsiaHedge
Awards 2012 dinner on 25 October, which was held at the Island
Shangri-La in Hong Kong.
The awards attracted some of the best brains in the Asian
hedge fund investing and allocating space, raising a toast to
the best-performing Asia-focused funds (on a risk-adjusted
basis). A full report on the AsiaHedge Awards winners is
included in this issue, starting on page 12.
We also bring you a Q&A with Zhen Liu of E Fund in
China, one of the pioneers of not just hedge funds but also
quantitative investing in the country. Liu gives an
insider’s view of the rapidly evolving quant funds
and CTA industry in China, making for a compelling read.
Continuing our deeper focus on performance, we bring you a
round-up of some of the top performers in Asian space,
including managers such as Ward Ferry, Serica, Credence and
Albizia. We also turn the spotlight on high-quality launches
with updates on the likes of Goldman-spinoff Alcova.
I hope you enjoy reading the November/December issue of