India a top market for hedge fund managers

Mumbai: Chinese and Indian markets are among the top picks for hedge fund managers in 2019 as they get more bullish on emerging market assets like equity and fixed income.

There is a sharp increase in hedge fund preferences for China and India as investment destinations during the year, according to a survey by global investment firm Credit Suisse.

For the second year in a row, investors indicated that Asia-Pacific and Emerging Markets are the most in-demand regions, with China the most preferred overall country. While interest waned over the course of 2018, strong demand returned in 2019 with the three geographies seeing the largest positive net demand swings, the Credit Suisse report said.

“Allocators continue to recalibrate how they employ hedge funds. Preference is shifting to customised solutions through Managed Accounts and Co-Investments that tailor fit specific investment objectives, exposures, and risk parameters. At the same time, investors are increasingly looking at allocations through the lens of their overall portfolio, converging hedge funds with traditional asset classes,” said Joseph Gasparro, Head of Content for Credit Suisse Capital Services Americas.

The survey interviewed 311 institutional investors with $1.12 trillion in hedge fund investments, including pensions, family offices, insurance companies and sovereign wealth funds.

More than half of those surveyed were in the Americas, 32 per cent were in Europe, the Middle East and Africa and 16 per cent were in the Asia-Pacific.

Institutional investors also are increasingly integrating hedge funds into their portfolios, with 42 per cent now categorising hedge funds by asset classes, instead of in an “alternatives” bucket, as they have traditionally been classified, according to Credit Suisse.

Investors who have made redemptions expect to reinvest their gains in the hedge fund industry, with 89 per cent saying they expect to reallocate their capital to other hedge funds, a three-year high, according to Credit Suisse.

“Investors are staying the course on their hedge fund exposure. It is important to highlight they are focused on re-underwriting their existing portfolios; reducing the overall number of positions and sizing up where they have conviction. Investors are focused on growing relationships with managers who have differentiated expertise, strong risk management skills, and a clear track record of being accretive to an investor’s portfolio,” said Melissa Toma, Co-Head of Credit Suisse Capital Services Americas.