Market Outlook 2021 Asia is in focus for hedge funds

Asia has been a standout theme for UBS Hedge Fund Solutions and they have doubled their allocation to Asia equity hedge fund managers over the last five years. Adolfo Oliete, Head of APAC Investments explains why.

27 Nov 2020

Asia has been one of the standout thematics in our team’s allocations and we have more than doubled our allocation to Asia equity hedged funds over the last five years.

Adolfo Oliete, Head of APAC Investments, UBS Hedge Fund Solutions

Market outlook 2021 The road back to normal

3 reasons why Asia is a standout theme for hedge funds

1. Higher alpha generation in Asia

The shift to Asia has happened because of higher alpha generation in the region, due to secular growth opportunities, structural market changes, and limited hedge fund capital in highly liquid markets.

2. China’s inefficient equity markets offer more alpha opportunities for long and short investors

China's large equity universe is under-researched by the sell side and has historically experienced higher dispersion, offering more alpha opportunities for long and short investors.

3. China’s equity market has low foreign and hedge fund capital participation

A shares have very little foreign ownership (8.9%) and that plays well for hedge funds.

That’s because hedge funds are very active and can take advantage of the high turnover in China for opportunities both on the long and short side.

The turnover in China’s equity market is almost two-and-a-half times than the US.

Adolfo Oliete

Head of Asia-Pacific Investments, UBS Hedge Fund Solutions

Adolfo is primarily responsible for spearheading investment research in the region. He is a member of the UBS Asset Management APAC Committee and the Management Committee. 

Adolfo leads research on markets, hedge fund investment due diligence and co-investments in Asia. He has a senior management role in Asia and represents the region in portfolio management meetings.

Prior to joining UBS in 2012, he spent one year as a hedge fund consultant at Casteel Capital.

Before that, Adolfo worked at Highbridge Capital Management in New York and London in 1997, where he was a Senior Vice President. During his last six years there before his departure in 2009, he traded European Convertible bonds and helped manage the European Convertible bond arbitrage portfolio.

Source: Reuters Eikon; UBS HFS, as of August 2020. Universe is based on companies with >=$500m market cap and >=$0.5m average daily turnover. Universe is based on stocks listed in Japan, China, United States, countries within MSCI AC Asia, countries within MSCI AC Europe. Analyst coverage is based on Reuters Eikon.

Source: Thomson Datastream, UBS, as of 30 June 2020. Based on 5- year average standard deviation of constituents' monthly returns.

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