Investors Bank On Track Record Of Asian Hedge Funds

by Carla Johnson, Investors Offshore.com

22 June 2005

As evidence mounts that poor returns are forcing larger numbers of hedge funds out of business, wealthy individuals and institutions are increasingly likely to invest in more established hedge funds, a trend which could harm many smaller hedge funds in Asia, according to some of the region's fund managers.

"The industry is growing, and people are starting to gravitate toward larger, more established funds that have track records," noted Francis Tjia, managing director of Income Partners Asset Management in Hong Kong at a conference in the city last week.

Data compiled by Bloomberg shows that of the 391 funds based in Asia, only 39 had assets of $200 million or more. The largest of the funds that have reported the amount of assets they manage is the Mauritius-based ADM Gelleus Fund, which manages a little under US$750 million.

Eugene Kim, managing director of Tribridge Investment partners in Hong Kong, is of a different opinion, believing that performance, rather than size, is what attracts investors to hedge funds.

"Performance is what determines whether you survive or not," he stated.

"Whether you're big or small, if you don't put up the performance numbers, you're not going to get money, and what you do have is going to get pulled."

His words were uttered shortly before it emerged that a number of major hedge funds, including the London-based Bailey-Coates Cromwell fund which, at its 2004 peak, boasted US$1.3 billion in assets under management, have gone to the wall after sustaining major losses. GLG Partners and California-based Marin Capital LP have also become victims of a difficult trading environment for hedge fund managers which has contributed to the lowest hedge fund returns since 2002.

The amount invested in Asian hedge funds will increase by one-third during 2005, according to the Alternative Investment Management Association in Hong Kong. This continues the strong growth in Asian hedge funds where assets under management almost doubled from US$35 billion to US$60 billion between 2003 and 2004.

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