Jobless bankers may lift Asian hedge fund numbers

The number of Asian hedge funds could increase by 10 percent this year as more unemployed bankers and traders launch new funds and the cost of doing business slumps.

It's much better to be a small hedge fund manager than an unemployed investment banker. We are beginning to see quite a strong wave of managers' formation, which is entirely consistent with what we saw after the Asian crisis.

It’s expected that these bankers could add to around 700 hedge funds already based in Asia, as battered global banks shed staff who have strong relationships with potential investors, cash from bonuses, and friends to start off small funds.

Assets under management in Asia could remain little changed, from an industry estimate of $100-$150 billion last year.

The Asian hedge fund industry saw huge redemptions last year as only a quarter of 1,150 Asia-focused hedge funds made money in 2008 compared with around 40 percent of global hedge funds.

Chicago-based Hedge Fund Research said its HFRI Emerging Markets Asia ex-Japan Index dropped 33.5 percent last year, reflecting the poor performance of funds in Asia, underperforming the 19 percent drop in its main global HFRI fund weighted composite index.
But the problem is that some of the Asian hedge funds had become so large that it made it difficult for them to take advantage of limited opportunities to short stocks in Asia.

If you are running a long/short fund right now, $100 million or $200 million, your shorting universe is fairly healthy. It's been quite difficult to allocate to long/short equity in Asia because managers who you want to allocate too are typically running too much money.

Long/short strategy was among the worst-performing strategy in hedge funds globally last year, losing more than a quarter on average, according to data from Lipper, a unit of Thomson Reuters.