Hong Kong has been relatively slow to embrace hedge funds, whilst other Asian countries have quickly recognised their attractions. Financial observers say that although Hong Kong investors are interested in the idea of these get-rich-quick funds, on the whole they do not really understand exactly what hedge funds are all about.
Thomas Chan, director
of the independent financial adviser Harris Fraser
(International) Ltd, said recently: 'Even now investors
don't really understand what hedge funds are, and
they only think of them as macro global investments.
' He also suggested that the level of interest in
hedge funds is dependent on economic conditions: 'Investors
only think about hedge funds when they lose confidence
in the local markets. Now the economy is picking up
again they believe they can handle their own investments
and make a profit,' he said.
.
According to David Chapman, senior portfolio manager
of Towry Law (Asia) HK Ltd, investors are definitely
more interested in hedge funds this year because of
concerns about the stock markets. He commented: 'Most
Hong Kong clients are going for conservatively managed
funds where the prime objective is capital preservation.
In Taiwan it's different - they are looking for exciting
hedge funds because they are used to volatility and
can live with it. Here [in Hong Kong], they want returns
of 12 per cent to 15 per cent and very little volatility."
.
The fact remains that of the 1,700-plus investment
funds authorised for sale in Hong Kong, there is only
one hedge fund, and even that one prefers to go by
another name. Matt Dillon, regional manager, Asia
Pacific, for EDF Man Investment Products (Hong Kong),
said: 'Because of the misconceptions and preconceived
ideas around hedge funds, the industry tends to prefer
the term alternative investments.'
.
The firm's AHL Diversified Futures fund was introduced
in Hong Kong in May 1998. As of the end of October
2000 its assets were $39 million. Although the fund
has attracted what Mr. Dillon describes as a "loyal
following," it has not been an easy concept to
sell to Hong Kong investors who 'think it's a high-risk,
high-return product or somehow safe because you've
hedged your exposure.'
However, the fact that the fund is locally authorised has made it easy for financial advisers to market it and to include it in investment seminars. Although advisers in Hong Kong can provide information about specific hedge products if it is requested by their clients, they cannot actively market unauthorised funds. As long as there is only one authorised hedge fund in Hong Kong, investors' exposure to alternative investments will undoubtedly remain limited.
.
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