HSBC Cuts Ties With Smaller Asian Hedge Funds

Oct 15 2012 | 8:40am ET

HSBC Holdings is cutting loose some of its smaller Asian hedge fund clients to concentrate on the more profitable ones.

Citing three people “with knowledge of the matter,” Bloomberg News said HSBC, which administers $150 billion in assets for hedge funds, is targeting funds managing less than $50 million for termination, although some of those cut manage as much as $100 million. The cuts follow a recent HSBC review of its fund administration clients and come as banks are looking for ways to save money to offset higher regulatory costs.

“From an admin point of view, serving a client that has $20 million in assets would be just as much as serving a client with $200 million—you still have to do the same asset valuations,” Allard de Jong,  group director at Portcullis Fund Administration (S) Pte in Singapore (and a former head of Alternative Fund Services at HSBC there) told Bloomberg.

Hedge fund administrator fees are usually basis points of hedge funds assets under administration but with small funds, said de Jong, those points don't usually “kick in.” Smaller funds are often subject to minimum charges.

Investors have pulled over $440 million from Asian funds this year and, according to Eurekahedge, 70 Asian funds have closed so far in 2012.

Anthony D’Silva, a managing director in charge of business development in the Asia-Pacific region for Apex Fund Services, told Bloomberg his firm has been in talks with about a dozen funds cut loose by HSBC and is in the process of signing a few up.

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