Smaller Hedge Funds Asia
Smaller Hedge Funds Struggle to Enter Asia
Yesterday, we noted that hedge funds are expanding their presence in Asia, especially Hong Kong. As a follow up, the Journal has an interesting article explaining how smaller hedge funds are struggling to expand in the region. Although Asia seems like the place to be for hedge funds, smaller hedge funds are encountering difficulties in raising capital to invest in Asia.
But not everyone in the industry is sharing in the fruits of this growth. In particular, smaller hedge funds are finding it difficult to raise capital as large pension funds are increasingly cutting out funds of funds as middlemen. That trend began in in 2008 when it emerged that many had invested money with convicted Ponzi scheme operator Bernie Madoff, tarnishing their reputation.
A fund of funds invests money into a portfolio of funds rather than into any one fund.
“These funds of funds claimed their expertise was doing the due diligence, but ended up investing in a fraudulent fund,” said Tokyo-based Edward Rogers, chief executive of Rogers Investment Advisors, which advises on the fund of funds industry.
These middlemen typically look at smaller hedge funds that slip under the radar because they aren’t big players, allowing them to raise capital from investors looking for better returns. Source
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