Emerging-Markets Managers on the Front Lines
BHA analysts often receive specific search requests from investors that are looking for fund managers. Many investors want funds not only to be a specific type but also to meet certain conditions and criteria before they will kick the research and due diligence process up a notch. Recently, analysts have noted not only a significant increase in the number of investors interested in evaluating funds focused on emerging markets but also in the number requiring that funds be located on the ground, in the market the fund is investing in.
From the beginning of the year through the end of the second week of April, 197 hedge fund investors indicated an interest in funds specifically trading in emerging markets. The interest was quite profound, came from across the globe, and accounted for slightly more than 26 percent of hedge fund mandates. Over the same time frame in 2009, only 113 investors or 18 percent of active mandates indicated an interest in funds specifically trading in emerging markets.
A midsized, multifamily office indicated an interest in long/short equity funds trading in emerging countries across the Asia-Pacific region. Its particular requirement was that all of a fund’s operations be located in Asia. Its thinking was that a fund trading Asian markets remotely would not have the same insight as a fund located “in the trenches.” It wants to be sure its managers have their fingers on the pulse of the market.
With the number of mandates for emerging-market-focused hedge funds spiking during the early part of 2010, it will interesting to see if investors begin to favor specific countries or regions over others. It also will be interesting to see if there is an advantage to being located in the market the funds are trading rather than remotely when it comes to attracting investor dollars.