Assets under management (AUM) of the hedge fund industry in Asia-Pacific have been steadily increasing: at the end of 2017, managers based in the region held $156bn in AUM, representing a 16% increase from the end of 2016. The number of active funds in the region has also grown by 5% from April 2017, with Preqin’s online platform now tracking more than 1,500 such funds.
As shown above, Hong Kong is the largest hedge fund industry in the Asia-Pacific region, followed by Australia, China and Singapore; of the 10 largest hedge fund managers in the region, four are based in Hong Kong. Value Partners, the largest Hong Kong-based hedge fund manager, currently holds AUM of $16.6bn and concentrates its investments in Asia, particularly in Greater China. Australia (3), China (2) and Singapore (1) are home to the remainder of the 10 largest Asia-Pacific-based hedge fund managers.
Equity strategies are the most utilized top-level hedge fund strategy globally, constituting 47% of all active funds. The case is no different within Asia-Pacific, as equity strategies hedge funds form the majority (58%) of funds in the region. Among investors interviewed for the 2018 Preqin Global Hedge Fund Report at the end of 2017, the largest proportions were targeting investment in equity strategies funds, specifically long/short equity and long-bias funds, over the course of 2018.
Four of the 10 largest hedge funds in the Asia-Pacific region employ a long/short equity strategy, collectively holding $11bn in AUM. Platinum Asia Fund, managed by Sydney-based Platinum Asset Management, is the largest long/short equity fund in the region and the second largest overall, with AUM of $3.9bn as at February 2018.
All Asia-Pacific-based hedge funds incepted in 2018 are located in the three dominant economies. These markets have regulations and programs in place that make them attractive to fund managers, such as Singapore’s tax incentive scheme. The scheme provides a reduced tax rate of 10% for fee income received through fund management and investment advisory activities. Singapore and Hong Kong also serve as gateways to their neighbouring countries, putting fund managers in a strong position to attract capital from investors.
As shown in the 2018 Preqin Global Hedge Fund Report, the largest proportion of global hedge fund managers surveyed (33%) planned to launch an equity-focused hedge fund in 2018. In Asia-Pacific, three-quarters of Asia-Pacific-based funds launched so far in 2018 are equity strategy funds, outpacing the global proportion for the strategy.