New deposits arrived as regional hedge funds outperformed global peers in each of the last three years, returning an annualized 10.4 percent to beat the 6.7 percent gain of Eurekahedge’s global index.
Asia-based hedge funds attracted an estimated $14 billion of new capital in 2013 and 2014, a turnaround from the $17.6 billion of outflows over the previous four years, according to Eurekahedge. The figures may underestimate inflows because larger hedge funds typically do not report to public databases.
“It needed a good 2013 for the global investors to say Asia can differentiate in performance, Asia is a good alpha market,” said Matt Pecot, Asia-Pacific head of prime services at Credit Suisse, referring to funds’ outperformance over market gains. “That’s why people are parking money here.”
Prime brokers provide services to hedge funds, including lending cash or stocks, settling their trades and linking them to potential investors.
In a region whose smaller markets are vulnerable to capital flows from the U.S. and Europe, there have been concerns rapid asset expansion will hinder hedge funds’ ability to generate investment gains.
Turiya Advisors Asia, which started in April 2010, decided to return 17.5 percent of its end-of-2014 assets to investors to maintain performance after the size of its hedge fund swelled with new capital and investment gains. The Hong Kong-based firm, led by former Goldman Sachs and Deutsche Bank AG trader Davide Erro, oversaw more than $3 billion after starting with $150 million.