Demand Grows In Hong Kong For Retail Hedge Funds

by Carla Johnson, Investors Offshore.com

12 April 2005

Despite complaints from the industry that hedge fund regulations are too stringent, a recent report by Dow Jones has suggested that demand for retail funds among the city’s smaller investors has been growing apace.

According to Giselle Lee, Hong Kong head of sales at Man Investments, the world’s largest hedge fund seller, when the firm launched its first retail fund in the territory last year, two-thirds of the demand came from retail banks.

"Hong Kong is one of the most successful retail hedge fund spaces anywhere," Lee told Dow Jones.

"Along with Singapore, Hong Kong was one of the first to embrace retail hedge funds in Asia. In the US and Europe, demand has been primarily institutional,” she observed.

Lee added that Man is planning to launch more retail funds in the near future as the firm attempts to cater for this growing demand. At present, the firm offers the Man Hedge Diversified Ltd, a fund of hedge funds with a minimum investment of $US20,000, and a futures fund known as the Man AHL Diversified Futures Ltd.

"Retail banks are finding that their clients are getting tired of generic guaranteed funds and are looking for more ways to diversify," she noted.

While many in the industry have criticised Hong Kong for possibly over-regulating the retail hedge fund sector, Lee argued that it is precisely because investors are so well protected that that demand has been so high.

"I think the higher takeup by retail clients - that is the man on the street - in Hong Kong is due to the presence of regulations," Lee stated.

Unlike many parts of the world, where the minimum investment limits of $US100,000, and frequently $US1 million put hedge funds out of reach of ordinary investors, in Hong Kong, the minimum investment needed for hedge funds of funds is US$10,000, while for single strategy funds it is US$50,000.

Eventually, Lee foresees that hedge funds will become a significant part of institutional portfolios to a similar degree as in Japan, where around 30% of portfolios are invested in these alternative instruments.

Recommended