Quantitative hedge funds on the rise in Asia

More Asian hedge funds are starting computer-driven strategies, as investors disappointed by the poor performance of some traditional funds search for better returns.

In Singapore, US$2 billion (S$2.81 billion) multi-family office Thirdrock Group has launched a quant fund, and Lucerne Investment Partners is considering starting one.

Mr Charles Wang, a former portfolio manager at Bosera Asset Management, is about to launch a vehicle on OP Investment Management's platform in Hong Kong, where Hantak Investment Advisors plans to next year open a version of the quantitative fund it runs out of Beijing.

The growing Asian interest in computer-driven funds is part of a global shift, as investors bet machines, devoid of emotion, are better placed to make money or protect their capital in volatile markets. Mr Will Tan, a managing director at Principle Partners in Singapore said equity strategies in Asia "have disappointed recently. So investors are seeking to diversify".

Asia-focused quant funds have beaten global peers in all but one year since 2005, according to Eurekahedge. In the first nine months of this year, the 3.4 per cent gain in Asia beat the 1.8 per cent global return for quant funds, according to the Singapore-based data provider.

So far, allocations to Asia-based quant funds have been in line with global trends, rising about 30 per cent over the past two years. Similarly, Asia is home to 88 quantitative funds, just 6 per cent of the global total of 1,387. And while the number of funds in Asia has risen by 10 per cent since 2011, the global number is up 70 per cent.

Mr Jivan Sidhu, an associate consultant at research firm Greenwich Associates, said institutional investors in Asia are showing more interest in algorithmic funds.

Of the 200 Asian institutions tracked by Greenwich, about 25 per cent are either investing in computer-driven or related strategies or considering doing so, up from between 10 and 15 per cent five years ago when yields on core asset classes were higher, he said.

Institutional investors in the region "would be interested in quant funds setting up here", Mr Sidhu said. "For a more sophisticated strategy like this, as a client, I want more face-to-face interactions, more face time with my manager."


A version of this article appeared in the print edition of The Straits Times on November 11, 2016, with the headline 'Quantitative hedge funds on the rise in Asia'. Subscribe