Changes Ahead for the Asian Hedge Fund Industry
While many global economies have reported economic upturns over the past two years, five years after the 2008 financial downturn, Asian hedge funds and Asian private equity investments continue to struggle. Since so many Asian hedge funds have not met their performance goals, countless managers have left the industry entirely, creating many new hedge fund job openings for experienced fund managers with the willingness and experience to lead these funds in a new direction.
Job openings are expected in both domestic offices, including those in Tokyo, Hong Kong, and at the American and European offices of hedge funds with Asian investment divisions. Europeans especially have contributed to the recent influx of job applications to the Asian private equity sector. Many European applicants are looking to relocate to Asia to escape perpetually high unemployment rates and high taxes in their native countries.
In more positive news for the private equity industry, China, which has historically been very restrictive of the types of investment vehicles allowed within the country, is showing signs of greater regulatory openness. In 2012, Shanghai began operating a pilot program to allow foreign hedge funds to establish subsidiary companies in China to raise renminbi (the Chinese currency) through private placements. China’s Securities Regulatory Commission has hired new personnel that are rumored to be more favorable toward the alternative investments industry. Additionally, the Bank of England has entered into a currency swap agreement for three years with China’s People’s Bank, with the goal of boosting British investment in China.
There is also the potential that hedge funds allowed in Hong Kong could soon be authorized in mainland China as well. Decreased restrictions would open up funding and investment opportunities to a vast population (approximately $1.34 billion
). Another opportunity for increased investment is in the proposed listing of Chinese “sunshine trusts” on public exchanges for all retail investors to access. Sunshine trusts are private trust funds with disclosure requirements similar to traditional equity or debt securities, but with fewer restrictions on investment strategies, similar to a hedge fund. By opening up its currency, allowing more foreign investment and loosening restrictions on hedge funds, major changes are underway in one of the world’s largest economic superpowers.
It is telling fact that Asia represents roughly 30 percent of the global stock market, but only 7 percent of hedge fund investment worldwide. Clearly there is the economic groundwork for future growth, though the means may not exist currently. As the hedge fund industry and the major Asian economies continue to evolve, Asia could take on a much more prominent role in the global hedge fund industry.