|Asian Investor Interview (1): Chinese hedge funds pour into Hong Kong||
Chinese asset managers are lining up to put operations in Hong Kong in order to attract international clients; the city’s markets regulator is said to be flat out processing licence applications from mainland firms.
But a number of smaller players are opting instead to join incubator-type platforms to develop a track record, as obtaining a licence from the Securities and Futures Commission is less feasible for managers with less than $50 million in AUM.
One such platform is Hong Kong’s Oriental Patron Investment Management (Opim), which onboarded seven new managers in the first half of this year, four of which are Chinese firms. About 30 hedge funds have launched through the Opim platform, with 18 currently active (two of which are Opim’s own funds). The rest either went independent or have closed down.
There are two key challenges for Chinese hedge fund managers looking to launch products offshore, said Fan. One is the cost. In Hong Kong or the US, it’s widely accepted that at least $50 million in AUM is needed to break even, based on a standard 2% management fee and 20% performance fee.
Then there is the time frame for launch. Typically it takes about six months to start a hedge fund, which may cause managers to miss the best timing to enter the market.