ASIA - Asian hedge fund activity is expected to heat up this year, with institutional investors, including pension funds, using their clout to get better returns from the companies they invest in.
Asia, and Hong Kong in particular, saw a flood of hedge and private equity funds open offices last year. “In the year ahead, we will see more not less activity by alternative investment managers in the local and regional corporate finance arena,” said Harvey Twomey, head of Pacific Rim equity finance sales at Merrill Lynch.
Already twice as many Japanese institutional investors use hedge funds as US institutions, contradicting their reputation as being among the most conservative investors.
Research from Greenwich Associates, the financial consultancy, showed that at the end of last year, 55% of Japanese institutions had invested in hedge funds, against 28% in the US and 10% in the UK.
“These allocations represent some of the highest exposures to hedge funds we have seen among any group of institutions in any market,” the report noted.Many pension fund managers in the region have traditionally invested in domestic bonds and equities, resulting in assets not always matching liabilities, but that is slowly changing with the emergence of more hedge funds.
And these funds are expected to have the positive knock-on effect of raising the corporate governance bar by flexing their big muscles to improve the way many listed and unlisted family-run companies report financial statements.Many funds are looking to invest before companies list on exchanges in search of longer and better returns.
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.