HONG KONG: New data has revealed that Hong Kong's hedge fund industry now employs about 4,000 people, with half working for the funds themselves and half working for supporting business and professional companies.

Intermediaries such as accounting firms, lawyers and prime brokers employ about 2,000 people dedicated to providing services to hedge funds, the local unit of the Alternative Investment Management Association found in a survey.

Hong Kong is the largest Asian hedge fund centre with managers based in the city overseeing 22 percent of the assets of hedge funds focused on the region as of June, said Christophe Lee, Chairman of AIMA's Hong Kong/mainland national group yesterday, citing data from London-based AsiaHedge.

The new data gives a more complete picture of the industry when combined with information in a survey released by the Securities and Futures Commission (SFC) late September, which found the number of hedge fund staff climbed 87 percent to 1,967 from March of 2006.

The survey also found the number of hedge fund managers authorized by the SFC grew to 542 by March 2009, nearly five times the 2004 number. The city's hedge fund assets increased sixfold to $55.3 billion over the same period.

In terms of the strategies used, equities long/short and multi-strategies remained the most popular.

The hedge funds were mainly Asia Pacific-focused. 59.1% of the total Asset Under Management was invested in the Asia Pacific markets. Out of this, only about $14 billion was invested in the Hong Kong and mainland markets.

Investors of the hedge funds were mainly from the Americas and Europe. Hong Kong investors constituted only 1.9% of the investor base.

The survey also found that of the total assets under management of the hedge fund managers, 28.5% was held in cash, deposits or money market instruments, reflecting the conservative investment approach adopted by the hedge fund managers amid the financial crisis.

The leverage of hedge funds generally remained low - 68.8% of the hedge funds had a leverage factor of 100% or less.

The percentage of hedge fund managers using more than one prime broker increased from 39.6% in 2006 to 52.5% in 2009, probably reflecting a higher awareness of counterparty risks.

The number of hedge fund staff climbed 87 percent to 1,967 from March of 2006, the city's Securities and Futures Commission said in a report released late September.

China Daily/ Bloomberg News

(HK Edition 11/06/2009 page3)