Australia-based investors make up 35% of all hedge fund investors in Asia-Pacific and manage an aggregate $1.44tn in total assets. By number, this makes Australia the most represented nation within the Asia-Pacific region for institutional investors in hedge funds. Within Australia, the three most substantial groups of hedge fund investors by number are superannuation schemes (60%), asset managers (16%), and fund of hedge fund managers (11%).
The majority of Australian hedge fund investors (80%) invest in the hedge fund asset class on a global basis. Regionally, Asia represents the most attractive investment opportunities for Australian hedge fund investors, with 68% preferring to seek exposure to the region. Australian hedge fund investors also demonstrate a strong preference for the domestic market, with 64% seeking to invest within Australasia. Unsurprisingly, given the current financial climate, Australian hedge fund investors express lukewarm enthusiasm towards the North American and European markets; only 31% and 15% of them are willing to invest in North America and Europe respectively.
When it comes to fund structure, although a large proportion of Australian institutional investors in the hedge fund space (45%) are open to investing in both direct vehicles and funds of hedge funds, direct hedge funds are still the more popular of the two. Thirty-five percent of these investors gain exposure exclusively via direct hedge funds, as compared to 20% that only invest in multi-manager funds. Strategically, most Australia-based investors in hedge funds are willing to add a wide variety of vehicles to their hedge fund portfolios. Long/short equity vehicles are the most commonly preferred strategy, with 45% of the investor pool having an appetite for such funds. The next two most favored investment strategies by Australian hedge fund investors are multi-strategy (42%) and macro vehicles (24%).
Australian institutional investors in hedge funds currently allocate an average of 5.5% of their assets under management to hedge funds, in contrast with an average target allocation of 7.6% for the same investors. This disparity suggests that there is still scope for these investors to add more hedge fund allocations to their portfolios, and that the Australian market continues to represent a potential source of capital for hedge fund managers, particularly those based in the Australasian and Asian regions.