Asian Startup Hedge Funds
For Asian Hedge Fund Startups, It's Returns-First
Some managers in Asia are not working as hard calling on investors as they once did, rather they are hoping their performance will do the talking for them. In Asia, many investors are less interested in a manager's background or the fund's story, rather they just want to see a strong track record of exceptional returns from startup hedge funds.
The returns-first strategy, by lowering costs and sharpening focus on performance, may help the latest batch of Asian managers avoid the fate of predecessors. Of the 317 Asia- focused hedge-fund startups since the beginning of 2009, about 74 percent have failed to boost assets “significantly” and 56 have been liquidated, according to Eurekahedge, a Singapore- based research firm.
“It remains a very challenging fundraising environment for young and small managers,” said Max Gottschalk, co-founder of Gottex Fund Management Holdings Ltd. (GFMN), which is based in Hong Kong, which allocates $7.6 billion to hedge funds. “By not taking in outside investors, the manager can remain focused on managing the fund and develop a track record without some of the infrastructure needed to attract investors and without the fund raising and client service distraction.”
The fundraising drought may prompt managers to take more risks to post returns that will help lure investors, said Paul Smith, chief executive officer of Hong Kong-based asset manager and hedge-fund distributor Triple A Partners Ltd.
“The only way out of this impasse for a smaller manager is to swing for the fences and to try to post two years of back-to- back spectacular investment performance,” said Smith. “This will get them noticed quicker. So in a perverse way, I expect this environment to heighten risk taking.” Source
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