Hedge funds a hit as Australia leads region

Australia’s hedge fund industry is now the largest in Asia, according to AXISS Australia’s just-released Hedge Fund report, with a market size of US$27 billion. Between June 2003 and June 2005 43 new hedge fund products were launched in Australia, compared to 48 in Hong Kong, 30 in Singapore and 28 in Japan.

“The rapid growth of Australia’s hedge fund market is attributable to a deep talent pool of investment management expertise and a sound regulatory framework for alternative investment strategies,” Kim Ivey, Alternative Investment Management Association in Australia chair, said. Australia’s superannuation guarantee system and an increasing understanding by investors of the need to diversify risk have also aided the industry’s growth. The report found that hedge fund launches in Australia have been boosted by the relatively low start-up and annual running costs. Australia has the lowest annual recurring costs in the region of between $US162,000 and $US340,000 and the second lowest start-up costs of between $US81,000 and $US195,000. “With Australia set to account for more than half the contestable pension assets in Asia by 2015 – a result of our mandatory retirement savings regime – Australia is emerging as the dominant regional hub for the investment management and hedge fund industries,” Gary Johnston, Axiss Australia executive manager, said. On the investment side Australian superannuation/pension funds have also been increasing their exposure to hedge funds over the past four years with the percentage of investors allocating to hedge funds rising from 3 per cent in 2001 to 32 per cent in 2005. “Australian institutional investors are now increasingly investing in hedge funds – double the numbers are investing in the asset class than just two years ago and their overall allocations to hedge funds are also increasing,” Johnston said.