Asian investors seeking high returns have started putting money into newer, smaller hedge funds in the region, according to Bloomberg.
Eurekahedge data shows that for the first 10 months of 2006 Asian funds with assets between $50 million and $250 million averaged returns of 11.9 percent. Comparatively, those with less than $50 million averaged an 8.6 percent return and funds with more than $250 million saw on average a 4.2 percent return.
“There’s dramatic advantage to try to get in with managers early on,” says Julius Wang, a managing director at Hong Kong-based Vision Investment Management Ltd., which oversees $1.5 billion of assets in hedge funds. Managers who have fewer assets can trade with less impact on the market, says Wang. In return, they are also more motivated to succeed.
Itochu Corp., the fourth-largest trading house in Japan, has put up $10 million to support two new funds, says Tokuichiro Yoshimura, head of its asset management business. In Hong Kong, Gareth Evans set up Param3tre with ambitions to focus on early stage hedge funds. “Size is the enemy of performance,” says Evans. The best returns are when funds are small.