High Attrition Predicted For Asian Hedge Funds

Jan 5 2012 | 1:03pm ET

If the future of the hedge fund industry lies in Asia, it appears the future will have to wait.

The region's hedge fund industry is likely to contract this year following a 2011 characterized by poor performance and fundraising difficulties. This year, those trends will result in significant attrition among Asian hedge funds, 125 of which closed in the first 10 months of last year against only 122 new launches.

"2012 will be the year of major attrition," GFIA's Peter Douglas told Bloomberg News. "People's stamina will increasingly give out; regardless of your commitment and personal wealth, the number of years that you can go pursuing your dream without any kind of compensation is a stretch."

With about 80% of Asian hedge funds below their high water marks, according to Bank of America Merrill Lynch's Ben Williams, and a tough performance environment over the next six months, many hedge funds may be forced to close their doors.

Nor are the multitude of Asian managers helped by investors' increasing preference for larger managers, and the growth of such larger, Western-based managers in the region.


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