How Asian-Based Hedge Funds Outperform U.S. And European Funds

• Asian hedge funds have experienced explosive growth in recent years
• Asian-focused funds managed locally have outperformed those managed in the U.S. and Europe
• Although Hong Kong and Singapore are the two major Asian markets at this time, others are expanding rapidly

A new report by Sungard analyst Madalin Prout discusses the evolving world of Asian hedge funds. The industry has demonstrated rapid growth in recent years, and it now plays a major role in Asian equity markets.

Growth
According to Sungard, the total assets under management (AUM) of Asian hedge funds grew by 29 percent in 2014 to $145 billion. Hong Kong and Singapore are the two largest Asian hedge fund hubs, accounting for two-thirds of all Asian AUM.

Strategic differences
Prout points out that only about two-thirds (65 percent) of global Asia-Pacific-focused hedge funds are headquartered within Asia, and about a third of funds are run out of the U.S. or Europe. She notes a difference in investing approach between funds managed within Asian and those managed outside the region. Specifically, locally-managed funds prefer equities strategies, while remotely-managed funds prefer macro strategies.


“Even more revealing is that analysis of the funds’ performance shows the Asia-Pacific-managed funds consistently outperform those managed outside the region, suggesting a distinct advantage in having local knowledge of the markets,” Prout adds.

What’s next in Asia?
According to Prout, several new markets in Asia are developing quickly, including Malaysia and Indonesia. Technology will continue to play an expanding role in Asian finance. Prout identifies systems consolidation and industry utilities as two key strategic areas that firms will likely target in coming years.