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Commodity Funds Suffer Challenges in the Asia-Pacific Hedge Fund Industry - October 2013

by Marian Rajanathan

  • 04 Oct 2013
  • HF

Hedge funds that trade commodities are suffering from numerous challenges in 2013, not least ambiguity in the markets. Key commodity markets like China are showing cooling demand, while recent events in oil producing regions have created uncertainty across the globe. These macroeconomic events are making it increasingly challenging for Asia’s commodity fund managers to draw capital from Asia-Pacific hedge fund investors, of whom only 9% professed interest in gaining a commodities exposure. Despite the uncertainties, many factors can contribute to upturns and the downturns in the financial markets, and sticking around and dealing with the commodity market’s volatility could bring an investor vast investment opportunities.

Preqin’s Hedge Fund Investors Profiles reveal that 31% of the investors in commodity hedge funds consist of fund of hedge fund managers, 16% of the investors are superannuation schemes and 10% are insurance companies. The majority of the investors are Australians (33%) and Japanese (31%).
In terms of location preferences, 84% of the investors choose to invest globally and a good balance of them choosing to invest in Asia (52%) and North America (51%).

More than half of the Asia-Pacific investors which allocate to commodity strategies have a preference to invest in commingled direct funds (54%) while 19% prefer direct managed accounts. 

Preqin’s Hedge Fund Analyst shows that Asia-Pacific’s hedge fund managers generally invest in the same geographical locales as those targeted by investors. 93% of the Asia-Pacific based fund managers which manage commodity funds maintain a global portfolio, while 48% of them invest in North America and 44% in Asia. Seventy percent of these Asia-Pacific managers manage commingled funds while 33% of them choose managed accounts.

Going forwards the reluctance of investors to invest in commodity hedge funds is apparent; only 26% of the Asia -Pacific investors in commodity hedge funds will seek investment opportunities in commodity hedge funds in the next 12 months, with 70% of them targeting a global exposure and 50% targeting an Asian Pacific exposure. However, this can change in the longer term, as Asia-Pacific hedge fund managers continue to evolve to adapt to the preferences of investors in a changing marketplace.

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