Asian Hedge Funds Target the Ultra-Affluent

November 21, 2011

Asian hedge fund startups and smaller funds with less than $100 million in assets are turning to millionaires and family offices to grow their business.

The move comes as large institutional investors continue to favor similarly large, established hedge funds, reports Bloomberg. Thus, the next best source for capital is these ultra-affluent private investors.

“It is always hard to raise money for new startup hedge funds, but it is generally easier from family offices and private wealth,” said Zhen Liu, managing director of index and quantitative investment at Guangzhou-based E Fund Management. “They are more performance driven and more willing to try out new and novel strategies and managers.”

Some examples include E Fund Management Co., China’s first officially registered hedge fund, which raised $100 million from the country’s wealthy; and Regal Funds Management Pty Ltd., an eight-month-old quantitative fund in Australia, which is aiming to tap family offices for its market-neutral hedge fund strategy.

The aftermath of the financial 2008 financial crisis, along with debt turmoil in Europe, are driving these ultra-affluent private investors to seek broader diversification.

“The traditional market is going through a shakeout,” said William Chan, chief executive officer of Singapore-based family office Stamford Privee. “It’s a good time to decide which managers would be able to preserve capital during this market turmoil and not show a high correlation to traditional markets like stocks and bonds.”

Roughly 90 percent of executive directors of family offices surveyed by the New Jersey-based accounting firm, Rothstein Kass, said that they are highly liked to invest more money with hedge funds. And nearly 85 percent already have allocations to hedge funds.

Family offices are an important next step for marketing hedge fund startups after first tapping into “friends and family” investors. “Smaller funds now have to cast their net wider in order to attract funds,” said Daryl Liew, head of portfolio management a Reyl & Cie, a Geneva-based fund. “High-net-worth individuals generally don’t demand an institutional level setup and this makes them a prime target of these smaller hedge funds.”

Previous post:

Next post: