CASE STUDY

Asia Multi-Strategy Hedge Funds

North American institutional investor | 2021

Engagement at a glance

Client Country/Type: North American institutional investor
Year: 2021
Asset Class: Asia Multi-Strategy Hedge Funds
Mandate Size: CAD 35 – 40m
Mandate Geography: Asia
Return/risk objectives: Cash + 4% p.a. net absolute return
Mandate Type: Pooled Fund
bfinance Services: Manager Selection

Client-specific concerns

Multi-Strategy Hedge Funds

This investor was making a first-time allocation to Asian Multi-Strategy hedge funds. With the exception of purely quantitative approaches, the investor was willing to consider all styles of multi-strategy as long as they had at least three years of live track record in the fund and a minimum fund AUM of US$100 million. However, there were a few preferred characteristics, including: strong drawdown (downside risk management) characteristics, diversified multi-asset versus single-asset; more equity market independence; a higher level of liquidity (e.g. quarterly or monthly dealing).

Outcome

  • Casting a wide net. This is an area of the hedge fund universe that is considered relatively niche. The team went beyond the existing bfinance database and scoured third party data sources to build the broadest possible manager universe. This process brought several new managers to the client’s attention that were previously unknown, including a number of new firms—some launched by new teams, some started by established teams spun out from larger houses.

  • Providing clarity on range of portfolio construction approaches. Investor gained a strong understanding of the variety of different implementation structures used in the Asian multi-strategy universe. They range from multi-portfolio manager multi-book platform approaches—brought together by a centralised risk control function—to single-team single-book approaches.

  • Shortened project completion time. With the client wanting to make a faster-than-usual deployment, the team adapted the manager research process to accommodate a tighter timeframe. This resulted in a quicker-than-typical progression towards a shortlist, but ensured that research depth would not be compromised.

Our specialist says

  • Equity-oriented strategies are dominant within the Asian hedge fund landscape (c.65-70% of the universe). There are benefits to combining a variety of complimentary managers and investing styles. Local presence and market access are extremely important for Asian multi-strategy funds: this is an extremely diverse region with varied regulation, licencing policies, cultures, languages, governments.

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