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April 24, 2008

Shake-out in Asian hedge funds?

Industry executives at the recent Reuters Hedge Funds and Private Equity Summit in Hong Kong forecast a period of consolidation in Asian hedge funds, according to a Retuers report on the event.
"Investors are demanding more of managers in regards to operational infrastructure, compliance, risk management ... you have to have a critical mass of assets under management to be able to pay for all of that," said Eugene Kim, chief investment officer of $250 million hedge fund manager Tribridge Investment Partners. "A lot of marginal managers who have not been able to make it to the next level in terms of fundraising, in terms of size, are either going to have to merge or get bought out or shut down."

...Ferenc Sanderson, senior research analyst with Reuters-owned fund information supplier Lipper, predicted the hedge fund attrition rate in Asia would be more than twice the global average of about 8 percent.

...Asian hedge funds were hit hard by tumbling stocks, partly because equity-focused long/short funds are overrepresented compared to more developed markets. While these funds are supposed to profit in both rising and falling markets because they can sell stocks short, in many cases they are long-biased, preferring to buy and hold shares.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.