Credit Suisse sees appetite for Asian hedge funds

Oct 15, 2009

Ben Happ, Credit Suisse's Hong Kong capital-introductions sage, says investors are placing greater emphasis on a hedge fund's operations and infrastructure.

There may be signs of light at the end of the tunnel for capital flows to Asian hedge funds. Prime brokers are noting a rise in interest in the big new launches taking place this summer and autumn, especially for those second-generation managers who have spun-out from previous investment management funds.

Two such launches are those from Sanjiv Bhatia whose seeding of Isometric Capital Management was announced last week, and Nick Taylor, ex-head of principal investments for Asia and Europe at Citadel.

"There's strong demand for investment talent, which has always been the case, but also a greater focus on the business's operations and infrastructure," says Ben Happ head of capital services at Credit Suisse in Hong Kong. "The US and Europe have a historical advantage in developing business and infrastructure because of the longevity of hedge funds in those regions, but Asia is progressing rapidly in these areas as a function of investor demand."

What this means is that if you are starting up with a couple of guys and some family money, it is a lot harder to compete in external capital raising against funds who come to the table with the 'full monty' of support and middle-office staff already labouring at their desks.

"It is not impossible to start a hedge fund without a chief risk officer or compliance officer, but these have become priorities for many investors," adds Happ. "We're seeing significant investments in seed or early capacity from Europe and North America and anchor investment sizes of $75 million to $100 million-plus. In all cases, investors are choosing groups with a robust business infrastructure."

To this end, prime brokers are increasingly finding their consulting services being called upon to assist in the capital-introductions thrust, given that investors are asking tougher questions in the capital-intro cycle about infrastructure and risk matters.

In the next edition of AsianInvestor magazine we will look in more depth at the new launch picture in Asia and how prime brokers' capital introductions experts perceive the landscape.