Hedge Fund Intelligence HFI Hong Kong Report April 2014 | страница 18

HONG KONG 2014

This is an unusually large share by the standards of Asian hedge funds, which
are generally dependent for the lion’s share of their assets on investors from
outside the region, most notably from the US.
BNY Mellon’s Houlihan estimates that 80 cents in every dollar raised for Asian
alternative products comes from US investors. “Europeans make up most of the
remainder, leaving very little from regional sources,”
Houlihan adds. “I don’t see this distribution changing much as we go into 2015. Asian funds aren’t
marketing aggressively into Europe. Because they
are largely dependent on reverse enquiry for European participation, AIFMD is unlikely to have a big
impact on the geographical split of fund-raising.”
Views are mixed on the long-term impact that
changes in the structure of the investor base will
have on the alternative investment management
industry in Hong Kong. At State Street, McNicholas
says that the progressive institutionalisation of
Dan McNicholas, head
the industry is leading to a much greater focus on
of sales for alternative
improved compliance standards and operational
efficiencies, which in turn is creating a goldmine of
investment servicing
opportunities for a range of service providers.
solutions, Asia-Pacific
Although this is a global trend, McNicholas says that
at State Street
it is probably more pronounced in Hong Kong than
>> Managers who have
in more developed hedge fund centres. “For mid-size
not previously operated in managers operating out of Manhattan, the incremena regulated environment tal step to creating more of an institutional sset-up is
are stepping into a world not that significant, although it may mean hiring an
additional legal or compliance specialist,” he says.
of AIFMD and FATCA, and
“Managers who have not previously operated in a
the obligation to navigate regulated environment are stepping into a world of
AIFMD and FATCA, and the obligation to navigate
regulatory systems in 14
regulatory systems in 14 different jurisdictions,”
different jurisdictions >>
adds McNicholas. “That is a big challenge for man18 Special Report March 2014

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agers, and it is creating an exciting opportunity for us to play a role educating
managers and providing services for them.”

CREATING A ROBUST OPERATIONAL INFRASTRUCTURE
Others agree that the process of institutionalisation of the hedge fund industry
is having a profound impact on its structure in Asia. “The biggest increase in
investment in Hong Kong hedge funds is coming from institutional investors,
including sovereign wealth funds from Japan, China, Singapore and Australia,”
says Omgeo’s Tony Freeman. “While these organisations are open to taking some
risks in their investment strategy, they are very risk-averse from an operations,
technology and reputational perspective.”
This, says Freeman, is pushing local managers to step up their investment in
their back and middle office capabilities, which is adding to their overall cost
base and is in turn squeezing out some of the medium-sized players. “As well as
buying systems to automate post-trade processing in a more efficient way, and
employing more people to fulfil processing and reporting obligations, a number
of hedge funds are employing chief risk officers for the first time,” says Freeman.
“Smaller players focusing on a very specific market niche have relatively modest
operational and technological requirements,” Freeman adds. “The vulnerable
funds will be those in the middle ground which traditionally allocated most of
their investment to research and trading. So I think we’ll see more polarisation
between the niche managers at one end and the largest funds at the other.”
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March 2014 Special Report 19