Hong Kong, Australia and Singapore are among Asia-Pacific’s most developed economies and all possess well-established financial centres. These countries also represent the region’s leading countries for hedge fund activity, with a growing number of hedge funds being launched and more institutional investors entering the hedge fund space.
According to the Preqin Special Report: Asia-Pacific Hedge Funds, Hong Kong, Australia and Singapore collectively manage 87% of hedge fund assets in Asia-Pacific. This equates to $126bn of the region’s $145bn in assets under management (AUM), as at the end of 2014. Over the course of 2014, AUM in the region grew by 30%. Recent developments in Asia-Pacific suggest that this upward trend is likely to continue.
In June, Australia took a decisive step towards revitalizing its hedge fund industry with the passage into law of the Investment Manager Regime (IMR). The purpose of the IMR is to remove tax uncertainty for offshore institutional investors gaining hedge fund exposure through Australia-based fund managers. This would potentially allow hedge fund managers in Australia easier access to foreign capital, which is likely to increase AUM.
Another notable development was the inception of the Shanghai-Hong Kong Stock Connect scheme in November 2014, which provides support for Hong Kong as a gateway for hedge fund managers investing within the Greater China region.
Another noteworthy development was the recent decision by South Korea’s National Pension Scheme (NPS) to consider allocating up to $2bn to hedge funds in the hope of achieving greater returns and diversifying its investment portfolio. While the NPS has not revealed its preferences for hedge funds, this decision could benefit the established hedge fund managers in Hong Kong, Australia and Singapore if it chooses to focus on Asia-Pacific-based managers.
These events, coupled with a surplus of savers seeking returns in a yield-starved investment environment, suggest that the Asia-Pacific hedge fund industry looks set to continue growing, with Hong Kong, Australia and Singapore at the forefront.