The BoLe Chronicle | May 2021
The rise and rise of Asia, yet where are the cheerleaders
Have lost count how many years in a row, since probably the start of my career, that Asian strategies were quoted as being the most promising. Yet our share of global hedge fund assets is still at a dismal single digit, a level we have been stuck with for the past 2 decades or so, in contrast to our more than 50% share of global economy.
Sadly ironic, most Asian hedge funds are thus deemed to be 'un-investable'. This is firstly due to their relatively 'small' AUM, which wouldn’t pass rigid ground rules of established western instos forbidding tickets of more than 5-10% of a fund’s AUM. Funny enough, the very same instos are usually the ones emphasizing long term partnerships with their investees. Isn't being one of their core investors then the best way to align interests?
Secondly, there is the argument that Asian hedgies fall typically below global standards, which is probably yet another circular reasoning. If it takes a critical AUM size to generate enough cash flows for managers to reinvest into the infrastructure and human resources in order to make them 'insto standard', where are they getting that critical mass in the first place if most instos are wary of breaking the above mentioned ticket size rule?
Now throwing in also the ESG hype of late, (which is yet another good reason for western allocators to take it slow when venturing out to what they still consider as the 'wild wild' East) how should Asian hedgies “stick together” and “fight against all odds” is indeed the question to ask, and something we here at Tripod BoLe have been working on daily. Maybe it’s high time for Asian managers to go on the offensive, emphasize our alpha-generating edge, and perhaps redefine global best practices in our own image.
Yes, our governments have been trying to take some initiatives of late. Look at the recent OFC/VCC movements and the related subsidies and regulatory reforms around it. But isn't it a bit myopic to only look at the supply side of things?
Consider how consulates in Hong Kong have actively promoted their homegrown managers: I’ve had plenty of opportunity to be a guest at one of the consulate generals' manor houses in town, and I had certainly nothing to do with politics nor public governance. These were all private events hosted by the respective CGs personally as some of their emerging home-grown hedge fund managers were in town for roadshows, with their house executive chefs serving hors d'oeuvres and the Honoraries themselves engaging us on investment related topics over a glass or two. This is what I consider genuine support, and this is just one example of how other governments endorse their teams in this intense competition for market share amid a rising Asia.
I wonder if our friends at InvestHK would entertain similar ideas when we can all travel freely again. I wonder if our administration could be more assertive in debunking mis-informed accusations and biases against us – Hong Kong being a global asset management center.
I wonder if our very own HKMA would consider an actual emerging manager program for, and allocating more to, home-grown managers rather than the Queens' Road branches of the same international names gracing the covers of HFM and Bloomberg overseas. Come to think of it, ever since the announcement last year, I haven’t heard any of my veteran peers being named as prospects.
Sounding like a broken record yet again, I’ve always felt it comes down to strong storytelling. We can work 24/7 here trying to help our managers tell a convincing story on and offline, virtual or in-person in this brave new world. However, if our entire industry, and better still, our governments would make a more concerted effort in the same global standard of other countries, it would be a major boost of morale, and everything else will follow.
We all know the rise of Asian hedgies is not an IF but a WHEN. And I certainly hope to see more like-minded peers joining us in this crusade along the way!
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