Hedge Funds Return To Asian Markets

by Carla Johnson, Investors Offshore.com, London

06 September 2004

Major US hedge funds which deserted Asian markets during financial crises in the late 1990s are returning, according to industry reports, driven by the weight of new money that has poured in during the last 18 months, seeking better returns than can be got in the West, where arbitrage openings have dried up as stock markets go sideways. Also Asian securities markets are less heavily researched than those in the US and Europe, so that stocks may trade below their actual value, offering arbitrage opportunities for hedge funds and other investors.

Hong Kong and Singapore are the favourite destinatons. Both are tax-friendly, and both have established hedge fund sectors. Singapore has the more friendly legislation, but Hong Kong is trying hard to catch up.

Top names such as Tudor Investment Corp, FrontPoint Partners, Rohatyn Group and Everest Capital are mentioned as front-runners in the move to Asia, and often such firms try to acquire local talent as they move in. Tudor is said to have lured two local fund managers who founded Pagoda Advisors of Singapore less than a year ago, persuading them to return $150m to their investors and join Tudor to begin again.

Hedge funds' previous major involvement in Asia ended in tears - at least for the region - as they made out like bandits on massive currency flows during the 1990s. Famously, Malaysia's Mahathir Mohammed called hedge-fund manager George Soros a "moron", while Soros said Mahathir was a menace to his country. Not surprisingly, the Soros Foundation is remaining tight-lipped about whether it is returning to Asia, like so many of its peers.

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