Asian Hedge Funds
Asian Hedge Funds
HSBC private bank bets on new hedge funds in Asia
Lender with US$25bto invest sees potential in the region’searly-stage managers
HSBC Holdings private bank unit, which invests US$25 billion in hedge funds globally, sees opportunities in backing new Asia-based managers, said Henry Lee, regional head of its alternative investment group.
About 15 per cent of the managers in an HSBC programme that provided capital to smaller hedge funds were based in Asia, Lee said. It has made early-stage investments in regional managers such as Hong Kong-based Zeal Asset Management, Myriad Asset Management and Tybourne Capital Management (HK).
HSBC is eyeing early-stage investments in Asian managers as rivals have reduced research staff in the region after the 2008 global financial crisis in attempts to cut costs, raising barriers for smaller hedge funds to expand assets.
While chances to back early-stage managers abound in the US and Europe, “we feel Asia provides just as good opportunities and we are willing to spend time doing it”.
It is cheaper to run a hedge fund in Asia, where small funds also find it difficult to raise capital, according to a report released by Citigroup last December.
Fifty-seven per cent of the 167 Asian-equity long-short hedge funds begun with less than US$50 million still manage less than that amount after an average of 5.3 years in existence, according to data from Singapore-based Eurekahedge cited in the report.
HSBC was an early investor in now multibillion-dollar global hedge-fund managers such as Brevan Howard Asset Management, Lansdowne Partners, Third Point and Two Sigma Investments, according to Lee.
In 2011, it started a “next generation” programme globally to invest in new hedge funds that had potential in an attempt to replicate the success of earlier ad hoc investments, he said.
Under the programme, HSBC private bank invests in new managers with less than US$300 million in assets through a US$100 million fund-of-funds, he said. It was allowed to account for as much as half of a small fund’s assets, instead of the usual 10 per cent limit, he said.
HSBC also allows private-bank clients to pick their own investments with the next-generation programme, he added.
Less than US$3 billion of HSBC private bank’s total hedge-fund investments were made through funds-of-funds, with the rest being held in custom-made accounts for clients, Lee said.