Which Hedge Fund Strategies Are Being Employed by Asia-Based Private Wealth Investors? - August 2015

by Pierre Papet

  • 07 Aug 2015
  • HF

The Preqin Quarterly Update: Hedge Funds, Q2 2015 revealed that Asia-Pacific-focused funds were down -1.66% in June 2015. However, the net return for H1 2015 was 5.14%, the greatest of all Preqin’s regional benchmarks and likely driven by the booming Chinese equity market in previous months. June and July witnessed stock market turmoil in China and the government continues to provide support through trading account suspensions and other precautionary measures in an attempt to encourage stability.

Preqin’s Hedge Fund Investor Profiles tracks 933 institutional private wealth investors currently investing in hedge funds, comprising wealth managers, single- and multi-family offices. A total of 102 (11%) are based in Asia. Seventy percent have a global hedge fund exposure and 44% include Asia-Pacific-focused investments specifically within their portfolio; the turmoil in China is likely to have impacted the performance of the portfolios of these investors.

The current volatility in the Chinese equity markets may have repercussions across Asia-Pacific and beyond, and those investors with exposure to equities through long/short investments may need to re-evaluate their exposure in the current environment.

Forty-eight percent of Asia-Pacific-based private wealth investors are active in the long/short equity space. Thirty-eight percent invest in macro strategies and CTAs are a common choice for the private wealth universe; 29% of these Asia-Pacific-based firms choose to invest in such funds. With equity markets in Asia experiencing a difficult 2015, more investors may look to get exposure to these strategies that offer downside protection.

It will be interesting to see whether or not these private wealth investors will alter their hedge fund allocation as they look to gain exposure to funds that capitalize on market conditions, and whether hedge funds are able to protect investors’ capital in light of the situation in China.

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