While some North American and European investors were drawing back on hedge fund allocations, Asia-Pacific-based institutional investors allocated $202 billion in hedge fund-based capital as of the end of 2016, according to a study from Preqin.
This allocation is up 12.2% from 2015’s $180 billion.
Tracking 588 institutional investors in the region, Preqin found that Australia (185 investors), Japan (118 investors), and Hong Kong (92 investors) contain the largest amount of hedge fund investors. The highest average hedge fund allocations came from Singapore-based institutions at 14.1% of their assets, with Hong Kong- and Japan-based investors at 13.9% and 13%, respectively.
The bulk of these investments came from sovereign wealth funds, which account for 54% of hedge fund-invested capital from the region. The China Investment Corporation leads with an estimated $30.8 billion in hedge fund investments, while Australia’s Future Fund allocates $14.8 billion, and Singapore’s GIC allocates $10.5 billion. The next-largest proportions are attributed to asset managers (10%), private sector pension funds (8%), and insurance companies (8%).
“Although the capital flowing to hedge funds from Asia-Pacific institutions is currently driven by sovereign wealth funds, there are signs that the industry’s appeal is attracting an increasingly diverse range of investors,” Amy Bensted, Preqin’s head of hedge fund products, said in a statement. “In particular, it will be interesting to see if investors in emerging Asian economies will become more involved with the asset class. Given the size of the economies of China and India, as these financial markets become more sophisticated, it may give a significant boost to the industry in the region.”
This comes at a time where North American and European allocation trends are moving in the opposite direction, with a larger proportion of investors seeking to draw back from hedge funds at the end of 2016, according to the report. In addition, private equity real estate is also seeing a resurgence, bouncing back in Q2 2017 from a rocky Q1.