Despite being smaller than the North American and European hedge fund industries, the largest Asia-Pacific-based institutional hedge fund investors are found to be in the ranks of top investors globally in terms of their allocation to the asset class. Preqin’s Hedge Fund Online service tracks 582 Asia-Pacific-based institutional investors in hedge funds, with the top 25 holding $95bn in hedge fund assets.
Investors based in Japan (12) account for almost half of the top 25 institutional investors in hedge funds, although also prevalent are investors located in Australia (4) and South Korea (3) investors. Despite there being only two China-based institutions in the top 25, sovereign wealth fund China Investment Corporation (CIC) has the largest allocation to hedge funds in Asia-Pacific and also ranks as the largest second hedge fund investor in the world.
The most prominent top-level strategy preference among the top 25 hedge fund investors are multi-strategy funds, with 92% of the sample maintaining a preference for this, above the 79% that seek macro strategies and the 71% that target equity strategy funds and credit strategies.
However, in terms of sub-strategy preferences, the largest proportion of the top 25 prefer long/short equity funds (71%) and diversified hedge funds (71%), although much of the largest investors in Asia-Pacific seek macro (63%), long/short credit (58%), multi-strategy (50%), managed futures/CTAs (50%) and relative value arbitrage (50%) funds.
Home bias is not evident among these institutions: 84% of the top 25 investors are open to investing in hedge funds globally. In fact, a larger proportion of the largest hedge fund investors prefer the traditional North American (64%) and European (52%) markets than for vehicles focused on the domestic region (48%).
While the industry experienced significant outflows throughout 2016, some of the largest investors remain active in the hedge fund space. Most notably, Australian sovereign wealth fund Future Fund has grown its allocation by 50 basis points to 14.2% of total assets under management since Q3 2016 as it works toward its 15% target allocation. Other active investors include CIC, which is interested in global macro, long/short equity and equity market neutral strategies worldwide and will continue to refine its portfolio by reallocating capital from redemptions, while Korean Teacher’s Credit Union will consider investing in one hedge fund in the year ahead.