Asian hedge fund business may halve

The hedge fund business in Asia is set to shrink by 33-50% in managed assets during the coming year, as fund managers face redemptions and struggle to put on successful trading strategies that do not require significant amounts of leverage.

This gloomy view was expressed by hedge fund industry participants in a panel debate on the future of the hedge fund industry at the recent Asia Risk 2008 conference in Hong Kong. "One-third to one-half of the industry is going to disappear," said Michael Gibson, a partner at Lim Advisors in Hong Kong.

The first casualties were so-called long/short equity funds that had made extremely high returns in 2006 and 2007 - often in triple-digit per cent growth - from what panellists termed "leveraged