One-fifth of Hong Kong investors will consider hedge funds

Around one-fifth of Hong Kong investors that currently invest in traditional mutual funds said they may buy hedge funds, following the Special Administrative Region’s decision in May to open up the hedge fund market to retail investors, according to a survey commissioned by the Hong Kong Investment Funds Association (HKIFA).

Of the fund investors questioned, 21% said they would consider investing in hedge funds, while 16% were undecided. Among those that will consider investing in hedge funds, 44% pointed to potential higher returns as the main reason, 22% said hedge funds can provide diversification to their portfolio and 9% said they would invest in a fund if it was recommended by a bank.

Of respondents that said they will not consider hedge funds, 39% thought they were too risky, while 6% said they did not believe in hedge fund managers.

“This is an encouraging start, as hedge funds are relatively new to the local retail market,” said Sally Wong, executive director of the HKIFA.

In May, Hong Kong’s regulator, the Securities and Futures Commission, set rules for firms wanting to launch hedge funds to retail investors, and the first batch of funds is expected to be approved later this month.

Under the new regulations, retail investors will be able to invest in hedge funds with a 100% capital guarantee with no minimum investment requirement. For a fund of hedge funds, however, a minimum investment of $10,000 is required, while customers wanting to invest in single hedge fund strategies must stump up an initial $50,000.

Single hedge fund and fund of hedge fund managers also need to have minimum assets under management of $100 million and five years’ experience in hedge fund strategies.