Asia hedge fund startups raised only $3.5 billion last year – the lowest amount since the global financial crisis, industry data showed, with activity in Hong Kong hit hard by COVID restrictions and heightened geopolitical risks.

While more launches in the region are expected this year, demand for hedge funds will still be subdued, market participants say.

“The money pool available to invest in hedge funds has reduced dramatically since last year and we would need better market conditions to see strong interests again,” Tareck Horchani, head of prime brokerage dealing at Maybank Securities in Singapore, said.
Only 45 hedge funds launched in Asia (including Japan) last year amid a broad market sell-off, far fewer than the 78 in 2021, according to hedge fund data platform With Intelligence. The $3.5 billion raised was the lowest amount in 13 years.

The figures do not include yuan-denominated onshore China funds.

Hong Kong had the biggest drop in launches, to 22 from 39, while Singapore was steady at 11.

Singapore-based Keystone Investors, a spinoff from Schonfeld Strategic Advisors, was the most notable launch in 2022. The Greater China-focused equity long short fund raised $1 billion after it began trading in April last year. With Intelligence said that based on information as of end March, it estimates that at least 25 Asia funds are in the works to be launched this year.

Market participants note that China’s decision to abandon draconian COVID restrictions and re-open its economy has allowed investors and fund managers to travel between mainland China and Hong Kong again.

A number of China-based fund managers are also setting up shop in Hong Kong for the first time to woo mainland investors with U.S. dollar-based products.

Horchani said macro funds, which tend to trade currencies and bonds off global macro-economic trends, continue to be the driving force in this market. But he added that demand has declined following the March shutdown of Graticule Asia macro hedge fund, once one of the largest macro hedge funds in the region.

The HFRI Asia ex-Japan Index which tracks hedge funds that target more than 50% of their investments in Asia ex-Japan, slumped 17.8% in 2022 but gained 2.9% in the first quarter.

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