Asia hedge-fund closures jumped 19 percent this year, with the industry set to shrink for the first time as clients withdraw more money after funds in the region underperformed US/EU focused funds. Furthermore, Asia has a higher share of long-short funds, which have fared particularly badly in recent months. Asian markets are less liquid and smaller than global markets.
Due to losses and redemptions, the region's hedge fund assets have shrank by 8.4% to $175.7 billion in the first half of the year, from $191.7 billion. Asia ex-Japan Index was down more than 20 percent year-to-date at the end of August, among the worst of any sector.
About 70 hedge funds in Asia have shut down as of August, an increase from 59 in the first eight months of last year. There are 618 Asia-focused managers managing 1,199 hedge funds, compared with 1,196 funds in December. Assets under management fell to $168 billion in August, from $176 billion at the end of 2007. Asia's hedge-fund average returns fell 12.6% this year, compared with declines of 0.1% in North America and 5.8% in Europe. Asian funds grew 18% in 2007, outperforming both region.
Fresh flows into Asia-focused hedge funds plunged by 50 per cent to $530m in the second quarter of the year compared to the first quarter, according to Hedge Fund Research. Asian hedge funds are more likely to be equity only whereas US and EU funds tend to be multi-strategy and thus more able to take advantage of opportunities in the credit crisis.
p/s photos: Charmaine Sheh Si Man