SEEKING LESS SCRUTINY,HEDGE FUNDS FLOCK TO ASIA

New EU rules could make it harder to offer non-EU funds to EU investors.Assets of Asia funds are seen rising 70% over the next two years,outpacing the 50% growth in global assets

AS REGULATORS in developed markets step up oversight of hedge funds,these free pools of capital are increasingly set to make their home in Singapore and Hong Kong.
That will accelerate the flow of talent and foreign funds into Asias top two financial centres,at a time when asset managers are already eyeing the regions rising wealth and strong economic growth.
Assets of Asia (ex-Japan ) funds are seen rising 70% over the next two years,outpacing the 50% growth in global assets,according to industry estimates.Asia,and Singapore in particular,could definitely benefit from the stupid regulatory environment in Europe, said Lionel Martellini,director of Frances EDHEC Risk and Asset Management Research Centre.
Scrutiny of hedge funds has heightened in Europe as politicians in Germany and France blamed the industry for causing the financial crisis though the crisis was caused more by regulated banks in the United States,Martellini said.
The G20 nations want greater supervision of hedge funds,with the European Union debating more contentious rules that could make it harder to offer non-EU funds to European investors.London has objected to the proposed EU rules.
Tim Rainsford,managing director Asia-Pacific at hedge fund manager Man Investments,which manages $39 billion globally,said the increasing focus on emerging markets was also playing a key role in encouraging hedge funds to move to Asia.
He said hedge funds are seeking exposure to Asia,encouraged by the developments in China as a global engine of growth as well as the growing importance of Asian currencies to global trade.
Hedge funds with Asia ex-Japan mandates had assets of $105 billion at end-2009,or about 7% of global hedge fund assets of around $1.5 trillion,Singapore-based consultancy Eurekahedge estimates.By end-2012,that will rise to at least $182 billion,as global hedge fund assets grow to $2.25 trillion.A Deutsche Bank survey of the hedge fund industry in March showed 45% of investors wanted to raise allocations to Asia (ex-Japan ) funds,compared with 18% in 2009.

CRITICAL MASS

Singapore,which has not escaped the global pressure to regulate derivatives and hedge funds,recently proposed regulations to licence bigger hedge funds and force smaller funds to maintain a minimum capital base.
These rules are set to increase costs,especially for startups,but will not halt the the wave of new funds heading to Asia.New York-based Fortress Investment is planning to return to the region through a Singapore office.Soros Fund Management is eyeing Hong Kong for its Asia office and London-based Algebris Investments plans to operate an Asia office from Singapore.UK-based hedge fund firm Prana Capital is setting up an office in Singapore and its founder,Peregrine Cust,will relocate to the city-state.
The regulatory arbitrage that Singapore has will be reduced to a certain extent when it moves to the licensing regime which is a bit more stringent, said Lian Chuan Yeoh,an attorney with Allen & Overy in Singapore

ASIA JOURNEY



Tighter regulation in West pushing hedge funds to Asia



Singapore rules not considered onerous for funds vs EU



Asia (ex-Jap ) hedge assets seen up 70% to $182 billio in 2 yrs



Many Asia funds employ long/short equities strategies



Credit and macro strategies less successful in Asia



EU panel to vote on hedge fund law

BRUSSELS: A European Parliament committee may approve a proposal on Monday night to force hedge funds outside the EU to agree to transparency standards in exchange for a so-called passport to market to investors in the 27-nation bloc.EU finance ministers are scheduled to vote tomorrow in Brussels on a version of the rules that would require funds to register separately in each country.Both proposals have been opposed by the US and the UK.