Tokyo, September 10, 2004 LAWFUEL – Best for law news, law, legal news, securities law, law research With hedge fund investment in Asia poised for a renewed surge, White & Case LLP today announced the formation of its Asia Investment and Hedge Funds Support Group (AIHFSG) to assist clients in the set-up and operation of such funds.
Factors likely to contribute to the next wave of hedge fund and asset managed investment launches in Asia include the liberalization of short selling rules in certain markets in the region, improved liquidity, and the entry of more diverse players and strategies, White & Case lawyers say.
To help clients stay ahead of these trends, White & Case’s AIHFSG with operations in the regions’ major financial centers including Tokyo, Hong Kong, Shanghai, Singapore and Bangkok provides legal advice on fund structuring and tax issues, regulatory requirements for intermediaries and offerings, and a range of transactional and regulatory advice on private equity, venture capital and hedge funds.
“New fund development in Asian markets is being encouraged by more fund-friendly rules, along with cash flows and risk appetites that continue to remain positive. Plus, the return profile for Asia is seen as outpacing comparable markets in the U.S. and Europe,” said Christopher Wells, a White & Case partner in Tokyo who chairs the regional group.
From the start of 2002 to August 2004, the number of hedge funds in Asia and the assets under management in those funds has risen from 162 funds managing US$14 billion to 452 funds managing in excess of US$50 billion today, according to Eurekahedge, an Asia-based consultancy focusing on alternative investments. In recent months, there has been resurgence in the number of new funds going through the process of fund formation with 46 funds launching in 2004, Eurekahedge reports. Hedge fund assets globally broke through the US$1 trillion mark in July this year, with funds invested in Asia approaching 10 percent of that total.
The need of institutional investors in Japan for better returns, and their increasing sophistication in selecting managers able to implement desired strategies, is encouraging growth in both hedge funds and private equity funds in Japan. Moreover, the need for real time trading information, and the desire to be closer to the Japanese investor base, has encouraged growth away from traditional centers including New York and Hong Kong.
Recent market information also suggests that start-up funds are no longer focused on a narrow range of investment strategies. Traditionally, Japanese long-short funds have accounted for the bulk of start-up strategies. However, it is expected that the domination of long/short strategies will diminish as the number of proprietary traders launching macro funds, commodity trading pools, and multi-strategy arbitrage funds increases. The recent impressive performance of distressed debt and macro strategies mean these approaches will also be considered for new Asian funds.
White & Case has seen secondary opportunity funds introduced into the Asian region to take advantage of private equity funds seeking to divest portfolio companies and private equity investors desiring to divest their fund interests. These funds bring together an interesting mix of investors (hedge funds as well as more traditional private equity investors) and investment strategies. “Multi-fund and multi-manager fund groups require increasingly sophisticated legal, regulatory and tax advice,” stated partner, Sharon Hartline, the Hong Kong funds desk head.
The White & Case AIHFSG also advises fund managers handling more traditional assets classes including mutual funds and managed accounts. Here too, Asia is seeing significant growth in activity. In China, for example, a large number of foreign asset management companies are setting up joint ventures and introducing new products to tap into the country’s hunger for investment products and its growing private and corporate wealth base. “The growth of managed funds in China, both at the institutional and retail levels will be very significant over the next two decades.” noted Victor Ho, the funds desk head in Shanghai. “We are seeing a lot of activity in the venture capital and private equity areas and expect increasing interest across the board including in the distressed asset and real estate investment areas.”
“In general, throughout Asia the concerns over liquidity and regulation are diminishing and players other than just the traditional large financial intermediaries are entering the funds management market,” said Wells. Asian markets are rapidly maturing in the alternative investment area in the same manner that U.S. and European markets in the late 1980s and 1990s.
White & Case has strong U.S., U.K, domestic and tax law capabilities that distinguish the AIHFSG as a true one-stop shop for funds set-up and operation. The Firm has an impressive track record and expertise in advising funds, particularly in Japan, and experienced resources around the region. The AIHFSG will meet clients’ needs by providing quick turn-around and competitive rates combined with a true understanding of their businesses.
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