Asia hedge fund launches drop to lowest number in 14 years as China interest wanes

FILE PHOTO: A woman walks past a screen displaying the Hang Seng Index at Central district, in Hong Kong, China March 21, 2023. REUTERS/Tyrone Siu/File Photo

By Summer Zhen

HONG KONG (Reuters) – Only 62 new hedge funds launched in Asia last year, the lowest number since 2009 and just 15 were China-focused funds, data provider Preqin said.

But Japan-focused funds more than doubled to 19.

WHY IT’S IMPORTANT

The figures underscore the shift away from China as the world’s second-largest economy struggles amid a property sector crisis and trade tensions with the United States.

Instead there is rising demand for Japan, pan-Asia, and multi-manager strategies, market participants say.

BY THE NUMBERS

* Liquidations outpaced launches in 2023 with 74 funds closing shop and nearly half of those were China-focused funds, the data showed.

* Only 15 hedge funds with a focus on China were launched, plummeting from 34 in 2022 and marking the lowest number since 2004.

WHAT’S NEXT

At least three multi-manager hedge funds which invest in a variety of asset classes are in the pipeline for this year, according to market participants and allocators.

One of those will be launched by Arrowpoint Investment Partners, run by Jonathan Xiong, former Asia co-CEO at Millennium Management. Bloomberg first reported the fund launch.

The firm has raised about $1 billion from investors, according to sources familiar with the matter who were not authorised to speak to media and declined to be identified.

Xiong declined to comment.

QUOTES

Patrick Ghali, managing partner of Sussex Partners, remains cautious about the potential for much growth in new fund launches this year.

“Japan is of great interest at the moment, but a lot of investors don’t fully understand the incredible alpha opportunity of that market and are investing in long only funds instead,” he said, referring to the potential to generate returns that are higher than market benchmark gains.

(This story has been corrected to delete a duplicated word in paragraph 1)

(Reporting by Summer Zhen; Editing by Edwina Gibbs)