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Overseas investors drive hedge funds: Report

Date: Thursday, January 18, 2007
Author: Financial Standard.com.au

A new report into the hedge fund industry by specialist consultant John Glass and Rainmaker has found while the local hedge fund market is $22 billion, it's becoming a big exporter with one quarter of the money being managed for overseas investors.

Glass said, “The hedge fund industry in Australia is still relatively new with the bulk of its growth emerging only over the last four years.”

This is why most managers still have only one or two products and why most managers are still quite boutique in nature, he said.

While the industry has been growing exponentially, it still has capacity to grow much more, fuelled by the renewed push by super funds to use hedge fund strategies within their defensive and absolute return strategies in addition to being just within their growth components.

“The industry even in its current shape has capacity to be almost twice as big,” said Glass.

Andrew Keevers, associate director of research at Rainmaker and co-author of the report, said, “This report is unique because it looked not only at hedge fund manager FUM [funds under management], but also at hedge fund business operation, personnel, product structure and development, as well as key service providers.”

Interestingly, the report found that hedge fund managers are a very stable part of the investment management industry. “The industry has experienced very little employee turnover of key investment personnel, with most being employed by the same manager for an average four years,” said Glass.