Strong Demand For Hedge Funds Expected In Asia

by Phillip Morton, Investors Offshore.com

05 April 2006

Hedge fund investments are expected to grow by 28% during 2006, driven by additional demand from Asia and the Middle East, particularly for global macro and equity long/short strategies, according to a survey by Goldman Sachs, the global investment bank.

The bank's poll of 467 investor groups found that the highest anticipated demand was from groups in the Asia region excluding Japan where respondents expected hedge fund investments to grow by 40% during the year.

Respondents from the Middle East and Japan meanwhile expect hedge fund investments to grow by 34%.

The prediction that demand will remain strong for global macro strategies, where fund managers make bets on macroeconomic trends in markets such as stock index futures, interest rates, commodities and currencies, is supported by other recently published research.

The last two editions of Tara Capital's Hedge Fund Strategy Barometer (HFSB), produced on a quarterly basis, show strong demand for macro strategies. According to the Geneva-based hedge fund advisory firm, the eleventh HFSB, published last month, shows that a record 63% of respondents are planning to raise their exposure to global macro strategies, with not one respondent saying that they plan to exit the strategy in the near future.

However, Tara's latest HFSB suggested that demand for equity long/short strategies is waning. European Equity hedge polled its lowest ever score last quarter, with only 26% of investors planning to raise their holdings.

Equity long and short and event-driven strategies saw the largest annual increase in allocation accounting for 41% and 13% respectively.

The Goldman survey also found that the proportion of investors expecting hedge fund fees to increase has declined for the first time in three years, with 11% expecting fees to rise, compared with 24% last year. Almost half of those polled also think that funds of hedge funds fees, where investors typically pay a double layer of fees, will fall in 2006.

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