In its most recent client monthly newsletter, GFIA pte ltd quantifies multiple parameters of change in the Asian hedge fund industry after the Global Financial Crisis. Their research confirms an industry that’s fundamentally changed.

Summary findings include:

· Fund closures peaked at the height of the GFC in 2008 and fund launches have been downward trending since 2005.
· Exposures peaked in mid 2007 and bottomed in early 2009 with a fairly high correlation to the cumulative returns of the market index.
· Funds became riskier post-GFC with greater dispersion across strategies
· Majority of strategies saw an increase in correlation with other strategies

GFIA pte ltd, also released findings on how the correlation between different hedge fund strategies and their benchmark indices within a seemingly diversified portfolio changed during the credit crisis, concluding that equity long-short strategies became more correlated after the global financial crisis, while non-equity longshort strategies maintained their low cross-correlations.

Peter Douglas CAIA, principal of GFIA, commented: “While hedge funds still offer a much more appealing investment profile than long-only funds, clearly it’s now harder to find genuinely different hedge fund strategies in Asia, and levels of risk appear to have ratcheted up. We suspect that investor appetite for extremely liquid opportunities probably explains much of the higher correlations, and slower allocations explain the drop-off in fund launches.”