Cambridge Associates eyes regional expansion

Family office executives recently told AsianInvestor that hedge funds had fallen out of favour with Asian families. But Alvin Tay, head of the Singapore investment and consulting business at Cambridge Associates, sees a different trend.

“Our clients are actually increasing their exposure to hedge funds, both globally and in Asia, and we’re getting more questions about Asian hedge funds from Asian clients,” he notes. “In general, however, we continue to see that most of the compelling hedge fund managers are in the US.”

Still, 10 years ago there was very little Asian hedge fund exposure in client portfolios, says Tay, but now they are increasingly adding Asian managers to clients' hedge fund portfolios as the community in the region continues to develop and adopt institutional best practice.

Boston-based Cambridge conducts rigorous due diligence on hedge fund managers and sets a high bar for manager selection, notes CEO Sandy Urie, with only around 200 of some 10,000 strategies that exist globally making it into clients’ portfolios. The hedge fund research and consulting team globally is around 75-strong.

A typical client’s hedge fund portfolio will contain 15-20 funds, usually spread across a range of strategy types for diversification and depending on the client’s objectives.

Speaking to AsianInvestor during a recent trip to Hong Kong, Urie said Cambridge can construct relatively small hedge fund portfolios, for as little as $15-20 million in investment. “One reason for this is that we’ve worked with these managers for a very long time, so they are often willing to accept an amount from our clients that is below their stated minimum.”

This may be a symptom or a cause of the make-up of the firm's customer base -- a third of its clients are relatively small institutions with around $100 million or less in assets under management.

Cambridge has been building its Asian business in recent months; in October it opened a second office in Singapore, as an operations centre to support its existing consulting and investment business.

The new branch has around 20 employees, bringing the firm's headcount in the city-state up to nearly 60 people. There were a handful of internal transfers at manager level to the new office, notes Tay, but it is largely staffed by new hires, including fresh local graduates.

Most of Cambridge's Asia-based clients are in Hong Kong and Singapore, but it is seeing rising interest from investors in Malaysia, South Korea, Thailand and China, where it has had a Beijing office since late 2011. Its Chinese clients are largely institutional, notes Urie, as the private client advisory industry there is relatively nascent.

The firm did have clients in China before it put a presence there, but the purpose of the office is as much about doing research for clients elsewhere as about servicing local customers, notes Urie. A local presence also helps to build relationships with domestic regulators.

“All our offices have both a research and a client agenda,” she notes, “and in some cases there is more focus on the research part.”

For example, the original Singapore office was established in 2001 largely to research Asian investment opportunities, says Tay, since the firm had only one client in the city-state at that point. The same was also true for its London branch, adds Urie, although the firm did have several UK and European clients when the London office opened.

Hong Kong might seem a logical choice for Cambridge's next office in Asia-Pacific (beyond Beijing, Singapore and Sydney), since most of the firm's Asian family office clients are based there. But Urie says there are no immediate plans to put a presence in Hong Kong, because the firm’s consultants elsewhere in the region travel to the city frequently to visit clients.

Other recent regional moves include Cambridge's signing of a partnership in December with the Asia-Pacific Real Estate Association (Aprea) to provide Asia-Pacific property investment performance data to suppliers and users of capital in the property sector.

Aprea will give its members access to aggregate private property fund benchmark data and statistics based on the performance of managers in the Asia-Pacific region. Cambridge will derive the investment benchmarks from financial information in its database of private real estate funds.

The US firm has established benchmarks for a range of alternative asset classes including real estate, natural resources, distressed, funds of funds and secondary fund asset classes. It will soon be releasing benchmarks covering Greater China, Africa, India, and New Zealand private equity and venture capital.

These will add to its PE and VC benchmark data covering assets in the US and other developed markets, as well as global emerging market PE and VC benchmarks.