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July 01, 2006 at 04:00 AM
In the hunt for opportunities in an increasingly crowded space, hedge fund managers are seeking to broaden their strategic options as well as their geographic options, according to recent research by financial services consulting firm Greenwich Associates in conjunction with Global Custodian magazine. The research was based on the responses provided by 1,227 hedge funds to questions concerning geographic and strategic asset allocation trends.
“Over the last 18 months, many hedge funds have been looking to enter emerging markets and exploit both their outperformance with respect to developed markets and the inefficiencies that still exist in emerging marketplaces,” according to Greenwich Associates’ principal John Feng. “They have also sought to increase their exposure to the Japanese revival.”
The research finds that European hedge funds are leading the way when it comes to adopting a global approach, with London-domiciled funds heading up the charge into emerging markets. Statistically, 54% of European funds invest in the U.S., 48% in Japan, and 38% in Asia ex-Japan. A quarter of them also invest in Central and Eastern Europe, 16% in Latin America, and 15% in South Africa.
North American funds are also participating in the geographic allocation shift, although at a slower pace than the Europeans. While only 35% of them invest in Western Europe, 28% now invest in Japan, 28% in Asia ex-Japan, 17% in Central and Eastern Europe, and just over 10% in Latin America.
The research also notes that the large multistrategy funds with over $1 billion in assets are faster to move into new markets than smaller ones, regardless of where the funds are domiciled.
More MultiStrategy funds
The number of multistrategy funds is also on the rise. Of 854 funds surveyed in 2005, 53% described themselves as single-strategy funds, while the remaining 47% said they were multistrategy. The numbers are inverted for the 1,227 funds responding to this year’s survey, with 53% of them calling themselves multi-strategy funds.
