Hedge funds raising bets on Asian mkts

Vatchkov is a product of the renewed focus on the world’s fastest-growing region as global hedge funds reverse their 2008 retreat from Asia,when markets were roiled by the collapse of Lehman Brothers Holdings. Whereas satellite offices with little decision-making influence were the norm pre-crisis,global firms are now committing to three-to-five-year plans as Asia becomes the “destination for and source of capital,” said Ho Han Ming,a Singapore-based partner who advises hedge funds at law firm Clifford Chance.

“We’ve seen the first wave of managers opening up,” Ho said. “There are still people considering making the move,but the first-mover advantage has been taken.”

Hong Kong and Singapore have been wooing hedge funds as the US and European Union have stepped up regulation. Singapore is set to become the second-largest global asset management center by 2025 after New York,with the growth in public and private capital available in Asia and more regulation in the US and Europe,PricewaterhouseCoopers LLP said in a report last year.

Global firms such as New York-based Soros Fund Management and Fortress Investment Group are setting up shop in Asia. They are reversing the pullback by managers including Blackstone Group LP and Och-Ziff Capital Management Group in the wake of the financial crisis.

“Those that have been able to navigate the financial crisis in Asia well—that’s a reflection of the larger managers—recognise that there are opportunities through crises,” said Tim Rainsford,the Hong Kong-based managing director of Man Investments in Asia. “Today in Asia you really have to show face. By showing face that means remaining and showing commitment to markets. The managers that do that will then attract good investors.”

Investors allocated more than $3.6 billion in net new capital to Asian hedge funds in the first quarter,accounting for only 11 percent of the $32 billion in new capital given to hedge funds worldwide,according to Chicago-based Hedge Fund Research. The largest 20% of funds oversee almost 80% of Asian hedge-fund assets,up from about 73% in 2005,Eurekahedge said in a September report. That may well change as global funds raise Asia’s profile and investor interest in the region eventually spills over to locally based managers,said Clifford Chance’s Ho.

“That’s when the regional managers will hopefully get airtime,” he said. “When investors reach out directly to local managers,this would provide more transparency to a region which may continue to be viewed by some as the still slightly exotic Far East.”

Och-Ziff’s OZ Asia Master Fund fell 31% in 2008. The size of the fund dropped to $1.5 billion last year,from $2.4 billion in 2008,even as it returned 34% in 2009 and 10% in 2010,according to its annual report.

The Artradis Barracuda Fund,run out of Singapore,fell almost 17% last year and about 14%in 2009,according to data compiled by Bloomberg. Artradis Fund Management,which oversaw about $800 million as of December 31 compared with about $4.9 billion in 2008,closed down in March and returned money to investors after it lost money from wagers on price swings in the last two years.