Asian hedge funds cut back on risk-taking post crisis - study

SINGAPORE: Hedge funds investing in Asian markets are taking less risk and allocating more capital to more liquid assets in the aftermath of the 2007/2008 financial crisis, a Singapore-based research institute said on Wednesday.

“Asia-focused hedge funds have broadly trimmed risk exposures post-crisis. They have reduced their exposure to small stocks relative to large stocks, scaled back their loadings on high-yield corporate bonds... and pared their allocation to the Japanese equity markets,” according to a study by BNP Paribas Hedge Fund Centre at the Singapore Management University (SMU).

“At the same time, however, they are now more exposed to Asian equity markets,” said the study by Melvyn Teo, a professor of finance at SMU.

Teo’s study used information from fund trackers Eurekahedge and AsiaHedge and compared data from the pre-crisis period of January 2000 to September 2008 to the post-crisis period from October 2008 to April 2011.

Asian hedge funds are beginning to find favour with investors after being shunned in the aftermath of the financial crisis.

According to AsiaHedge, newly set-up hedge funds in Asia raised $2.86 billion in the first half of this year, a big jump from $1.1 billion raised in the second half of 2010, with multi-strategy fund attracting two-thirds of the inflow.