Cost Conscious & Cautious: Feb 2017 Asia Operational Leaders' Summit

By Steve Au

Hedge funds are having a tougher time in the Asian market than in the U.S. market. With liquidity scarce, it’s difficult to raise capital. It is not surprising, then, that the tone of the HFM Asia Operational Leaders’ Summit held last week in Macau, China was one of caution and cost consciousness. The senior operational executives at the summit zeroed in on how to achieve cost savings and operational efficiencies while avoiding risk and maintaining compliance.

These themes were very much in evidence at the roundtables I moderated, which focused on the topic of “what you have to do to raise your assets under management (AUM) to $1B.” On a cautionary note, most participants agreed that $500MM is a more realistic goal than $1B in Asia. But regardless of whether a hedge fund is striving for $500MM or $1B, all the senior operational executives present concurred on what is essential to move toward that goal:

• Tighten up on time management. Chief operating officers (COOs) in Asia often wear different hats, including investor relations and business development. As a result, time management is critical, as is delegating tasks as funds grow in size and complexity.
• Go professional in business development. At some point, it becomes self-defeating for COOs to spend energy on business development. To grow AUM consistently and vigorously, funds need to hire professional business development personnel to form relationships with investors and engage in fundraising.
• Weigh outsourcing and insourcing. For each hedge fund firm, some activities do better outsourced while others do better insourced. The responsibility for determining which are which falls squarely in the lap of the COO, with the decision carrying significant ramifications for both costs and operational efficiencies.
• Streamline compliance. Hedge funds can expect more stringent compliance regulations coming to various Asian markets. Technology will be key to maintaining compliance as regulations continue to evolve.
• Invest in a customer relationship management (CRM) platform. With investors demanding more transparency and better communication, a CRM platform that can help build and manage relationships is critical for hedge fund success.