Asian Hedge Fund Startups Reach Billion Dollar Threshold

June 27, 2011

A number of Asian hedge fund startups have joined the Billion Dollar Club. Now, it remains to be seen if this breakthrough is a boon or bane to investing in Asia, reports Aradhna Dayal in Hedge Fund Intelligence.

The new members include Danny Yong of Dymon Asia, John Ho of Janchor Partners, Gen Kato’s MAM, Prime Capital and Nick Taylor’s firm, Sherigan. Together, these relatively new entrants into the hedge fund world have given Asia some billion-dollar clout.

But Dayal reports some caution among the Asian investor community, as some wonder whether these star managers can continue generating the alpha they earned on a smaller asset base. Or whether Asian markets, in general, are deep enough to sustain future investments of this size.

On the plus side, soaring trading volumes, growing market capitalizations, and more global companies listing on Asian exchanges point to future growth. Dayal also notes the Asian market is broad enough to support a multi-strategy funds, as opposed to simply betting long. Several of the new billion dollar funds employ this approach.

The Asian foreign exchange market (FX) has also grown tremendously, between 7 and 10 times, over the past five years, and trading volumes have skyrocketed. She notes there are also several Asia-based macro funds trading global currency markets, including Dymon Asia. Such a global approach makes is possible to produce returns in the neighborhood of 15-20% annually.

Accelerating M&A activity is also opening up big investment opportunities in Asia, especially for event-driven funds. Asian governments are fostering a “credit culture” to strengthen local debt markets, which can be a boon for fixed-income focused Asian hedge funds.

All in all, prospects appear robust for the Asian hedge fund marketplace. Which is why the June issue of Hedge Fund Intelligence has a slew of articles focusing on Asian topics, including Singapore’s evolution as an international hedge fund hub, new opportunities in China, and snapshots of other firms managing large portfolios in Asia, such as Fortress, Oasis, and Sparx.

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