Hong Kong hedge funds hit hardest in Asia-Pacific

Almost one out of five hedge funds in the Asia-pacific region closed from January 2008 up to the first quarter of 2009.

A research by the AsiaHedge, a part of the Hedge Fund Intelligence, revealed that in 2008 Hong Kong-based funds were hit the hardest with 27 closures, while Japan-based funds had the fewest with nine. The overall number of closures in Asia was 129 in 2008, with 17 more in the first quarter of 2009.

"The business of running a hedge fund became much more difficult in 2008," says Paul Storey, Editor of AsiaHedge. "Only those that navigate the markets and can meet increasing investor, operational and regulatory demands will survive."

The research notes that the largest number of closed or liquidating funds invested primarily in Japanese equities. In 2008, 32 Japanese long/short equity strategies closed. Asia except Japan saw 18 closures, while 12 Japan market neutral funds shuttered. So far in 2009, five Japan long/short funds have shut down.

The report forecasts that the rate of closures will accelerate in the region as pressures such as higher operational costs impact smaller funds. Although fund performance is also a contributing factor to fund shutdowns, AsiaHedge noted that investor redemptions was a leading factor in higher fund closures since September 2008.