Hedge fund boom seen in Asia courtesy of big banks and asset managers
In a report by Bloomberg, industry observers noted the proliferation of new hedge funds in Asia since the 2008 financial crisis. The new hedge funds were launched by global banks and asset managers including Goldman Sachs Group Inc., UBS AG and GLG Partners Inc. Some private equity firms like Highbridge Capital Management LLC and Pine River Capital Management LP were seen either expanding or restarting its offerings in Asia.
However, the rise of hedge fund activity by global banks and asset managers had threatened the business of smaller firms, said Bloomberg in its report.
Singapore-based managing director for Asia at Man Group Plc Tim Peach said investors who stay with a big company will help managers cover rising costs of running the funds, comply with regulations and more strict requirements of institutional investors. Man Group is the largest publicly traded hedge-fund firm in the world and bought GLG back in 2010.
In October, people who were familiar with the company plans said the unit of the largest Swiss lender with USD5.2 billion of assets, UBS O'Connor planned to launch its maiden Asian hedge fund that would be open to investors this year.
These smaller firms reportedly got to start their own independent firms right after the crisis, and are usually former talents of big banks, said London-based adviser for hedge-fund and private-equity investors Richard Johnston, who is also the Asian head of Albourne Partners Ltd. Johnston added, "A lot of people who would have gone independent don't have much of a choice now."
The rising costs to comply requirements and regulations and expenses to cater such institutional investors was seen as a burden for firms with funds less than USD50 million, and as such, are credited for inhibiting growth of smaller firms.
Industry observers saw an increase in foundations, pensions and endowments making direct investments to hedge funds in order to reduce paying for fees that funds of funds charge for collecting money for investors. These institutional investors, said Bloomberg in its report, are not able to invest in smaller firms as its holdings are limited at 10% of the assets of a single fund.