As hedge funds have begun to feature more prominently in the investment portfolios of Asia-Pacific institutional investors, long/short equity hedge funds have found their place as the most favoured strategy. Preqin’s Hedge Fund Investor Profiles database shows that 38% of hedge fund investors in Asia-Pacific are currently invested in or seek exposure to long/short equity hedge funds. The next most common strategies are multi-strategy hedge funds and global macro hedge funds, each favoured by 31% of the Asia-Pacific hedge fund investor community.
This preference for long/short equity hedge funds can be partly attributed to the region’s relatively well developed equities market. Long/short equity funds provide these investors with alternative methods to access traditional asset classes such as equities and fixed income. This is especially true for Japanese pension fund managers who are looking for alternative ways to gain exposure to traditional investments to meet the challenges of increasing pension liabilities.
In terms of the investor type, superannuation schemes make up the largest proportion of investors looking to invest in long/short equity hedge funds. Nearly 21% of the investor pool is made up of superannuation schemes, followed by asset managers (13%) and insurance companies (8%). Geographically, Australian investors make up the majority of regional investors in the strategy, making up 43% of the potential investor pool. This is followed by Japan (24%) and Hong Kong (12%).
The majority of Asia-Pacific investors in long/short equity hedge funds will consider investing globally, with over 84% open to doing so. Unsurprisingly, when looking at specific regions, the majority of these investors will invest in Asia (46%). This is followed by North America (44%) and Australasia (37%).
The willingness of Asia-Pacific hedge fund investors to invest close to home bodes well for domestic long/short equity hedge fund managers. Over half of the hedge funds currently being managed by Asia-Pacific-based managers include long/short equity in their investment focus; which shows that managers, as well as investors, are backing this strategy to succeed in the region.