On the 28th of November the Hong Kong Securities and Futures
Commission authorised the first retail alternative investment
funds for the Hong Kong market. Two single-strategy hedge
funds from JF Asset Management and one fund of funds from
the HSBC stable of products have been approved by the regulators
for sale to retail investors.
The single-strategy vehicles are the JF Asia Absolute
Return Fund and the JF Greater China Absolute Return Fund,
of which the latter is a new launch from JF Asset Management.
The funds will be solely distributed by JF Funds with no intermediary
sellers. The new fund will be run by Chung Man Wing, head
of JFAM's China team.
HSBC could not be immediately contacted for more details
on the fund of funds.
Though the magic number 3 has been widely reported in the
press, the SFC has gone to great pains to let people know
that there are many more applications in the pipeline. Other
guidelines were issued on the marketing of hedge funds and
the education of investors. The SFC has published a leaflet
called 'Ten Questions to Ask before Investing in a Fund',
a follow-up to 'How Much Do You Know about Hedge Funds?' published
earlier this year.
The SFC has also taken this opportunity to remind intermediaries
of their obligation to only recommend appropriate products
to their clients.
The question for the established, boutique offshore hedge
fund community has to be whether to register their current
funds for the retail market.
Most of the hedge fund managers in Asia run fairly small
boutique businesses. The idea of establishing the large back-office
and operations departments necessary to service large numbers
of clients is alien to these managers. Some service providers
are beginning to provide solutions to this problem by supplying
both systems and the large back-office service needed to cope
with a retail client base.
Hedge funds run by long only houses with experience in dealing
with many small clients, and which are already retail funds
in the market, seem best prepared to move into this market.
We perceive that the majority of independent managers, rather
than be in the first wave, are taking a 'wait-and-see' approach.
They would like to see if the retail market buys into the
concept and how much money is raised before committing themselves.