Preqin’s Hedge Fund Investor Profiles has seen a 14% growth in the number of Asia-Pacific-based investors active in the hedge fund space since the end of 2014 to present. In this blog, we will examine the investment trends and appetite of the top 50 Asia-Pacific-based institutional investors (excluding funds of hedge funds) by current allocation to hedge funds. Collectively, these investors have $2.1bn currently allocated to hedge funds.
Data from Preqin's Hedge Fund Investor Profiles shows that 23 of the top 50 Asia-Pacific-based hedge fund investors are based in Japan, 14 in Australia and five in South Korea. Private sector pension funds make up the largest proportion (12) of these investors, followed by superannuation schemes (8) and insurance companies (8). The average allocation to hedge funds of these investors is $3.4bn, with average funds under management of $69bn.
The top 50 Asia-Pacific-based investors typically began investing in hedge funds in 2003; this is in contrast to the remaining Asia-Pacific-based investors, who made their first foray into the hedge fund space in 2007, on average. Thirty-five percent of the top 50 invest in hedge funds only directly, while 17% invest in only funds of hedge funds; the largest proportion (48%) will consider both types. Those not in the top 50 have a stronger preference for gaining exposure only via direct investments (61%), whereas 13% gain exposure via fund of hedge funds vehicles only; 26% will consider both types.
In terms of investment approach, the top 50 Asia-Pacific-based hedge fund investors tend to consider all strategies, 77% include diversified strategies as a preference. Long/short equity funds are considered by 60%, long/short credit is also considered by just over half (53%) of these investors, as are macro funds (53%). There is substantial investor appetite for investing globally: 88% of the investors cite global as a geographical preference; 65% include North America specifically and 54% Asia within their preferences.
With the top 50 Asia-Pacific-based hedge fund investors already accounting for a total allocation of $2.1bn and the number of institutional investors in the region growing rapidly, the importance of Asia-Pacific investors looks set to continue to grow as investors become more sophisticated and fund managers increasingly look to the region to acquire capital for investment. As investors gain more hedge fund experience, we will see how structure and strategy preferences evolve and how managers seek to meet the needs of Asia-Pacific-based clients.