A new generation of regional managers has lower fees and competitive breakeven points than other regions. They also seem to be into surveys.

There is a new crop of hedge funds in the making out there and we here in the region seem to be doing many things right, according to a hedge fund survey released Thursday by Marex Prime Services and the Alternative Investment Management Association (AIMA).

In a report titled «Standing Strong: Emerging Manager Survey 2024,» the authors took a closer look at next-generation hedge funds managing up to $1 billion and came up with some surprising findings.

Falling in Price

Management fees in Asia Pacific were the lowest worldwide at 1.33 percent in 2024, a dramatic difference compared with two years earlier when they were the most expensive (1.41 percent) together with the UK.

Performance fees also took the bottommost position at 15.7 percent, a sharp contrast to results from previous surveys in 2022, 2017 and 2018 when they were second highest.

Breaking Even

They were the second leanest when it came to personnel, with the average hedge fund employing seven people in 2024 (North America was first with six), although they also down the most since 2022, when the average regional fund employed 10.

Their breakeven points could also be considered competitive, although they were not the lowest at $65 million. By contrast, the same number in North America was $61 million, in Europe (ex-UK) it was $55 million while the UK had the highest at $80 million.

No Sustainability Here

Investors in Asia Pacific are also not forcing next-generation hedge funds to follow sustainable investment considerations, as 87 percent don't factor ESG considerations into decisions.

By contrast, almost half of Europe-based investors include that in decision-making, although 75 percent in the UK and 74 percent in North America don’t.

Long-Short Dominates

When looking at the wider industry, the pre-eminence of long-short equity funds only increased in 2024, with it being the primary strategy for 39 percent of the entire population. Multi-strategy came a distant second at 14 percent, followed by «other» and event-driven at 11 and 10 percent respectively.

Surprisingly, fixed income and credit didn’t make more ground given the dramatic shift in interest rates in recent years. However, they did double from a relatively low base to comprise 10 percent of the total from 5 percent two years ago although that was still clearly less than the 15 percent high point reached in 2018.

No Events

Investor preferences mirrored much of the same trends, although the event-driven category literally disappeared off the charts in 2024. The average maturity of the funds surveyed was relatively stable at 3.1 years, although it was lower than four and five years ago.

«Investors surveyed appear to be shifting away from multi-strategy, global macro and event-driven funds in favor of fixed income/credit strategies, which have grown in popularity. In 2022, these strategies accounted for just 4% of investors’ allocations, but this figure has increased to 15 percent,» the report stated. 

More Time

The survey received 171 responses in total from hedge funds and 60 from investors, with the data points presented in the report using weighted averages.

There was another way that the Asia Pacific stood out compared with the others. Almost 39 percent of the responses came out of the region, more than any other. If nothing else, it shows that hedge funds here clearly have more time than they do elsewhere - or they are just more friendly and helpful.