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FT Reports that Asian-based Hedge Fund Managers Outperform Their Peers

In September 2007, as Wall Street’s troubles within the mortgage market continued to build, there was one news item that generated more chatter than one might expect.  This wasn’t surprising considering the outspoken and colorful nature of its subject, the acclaimed investor, world traveler, and academic Jim Rogers.   After nearly 40 years of living in New York City, he announced at a conference in Dallas that he was permanently relocating his family to Singapore.  The reasons he chose Singapore included its air quality, a high number of English speakers, and its robust business infrastructure, all in close proximity to China.   In explaining his move, he said in what has become an oft-repeated quote: “If you were smart in 1807 you moved to London, if you were smart in 1907 you moved to New York City, and if you’re smart in 2007 you move to Asia.”

At the time, perhaps Rogers was on to more than meets the eye.  A story in today’s Financial Times reports that funds with an Asia base, although not necessarily based outright in Asia, outperformed funds that did not from January 2005 to May 2010.  This comes at a time when a number of hedge funds, including Rogers’ former business partner, George Soros, are establishing Asian offices.  In Soros’ case, the office will be in Hong Kong.

The report itself was carried out by GFIA, a Singapore-based consulting firm.  The firm tracked the five-year returns of 668 funds, and found that Asia-based managers generated higher returns than their competitors who did not.  Five categories of investment strategy were covered in the study: Asian equity, Asian equity excluding Japan, Chinese equity, Japanese equity, and macro/multi-strategy.  While the categories, along with the geographical location of the firm that generated the study might suggest a pre-existing bias, the fact of the matter is that the study offers insight into the changing landscape of the hedge fund industry.  Indeed, GFIA has suggested that one effect of the Asian-based outperformance will be to “increase the dominance of the “Hong Kong/Singapore nexus” as the centre of the Asian hedge fund industry at the expense of London and New York.”

Disclosure: No positions