The allocation of part of the $160 million in assets under management held in the Bank of Bermuda's alternative fund of funds to two Asia-based hedge fund managers will bring the number of managers in its All Points alternative class fund of funds to 17, a comfortable number according to head of European investments for Bank of Bermuda, Adrian Fairbourn.
The managers will be chosen based on their ability to meet strict due diligence requirements, add diversification to the fund and provide consistent returns, says Fairbourn. "We appreciate that it pays to get in early in order to find good managers in a new market and Asia is a breeding ground for a lot of very capable hedge fund managers who have yet to be discovered by the outside world."
Bank of Bermuda has been investing in hedge funds for private clients on a discretionary basis since 1997 and launched the All Points fund of funds in October 1999. Nearly half of the $160 million invested in the fund comes from Asian-based, high-net worth investors, which is one of the reasons Fairbourn wants to increase the number of Asian fund managers in its manager mix. The only other Asia-based fund currently on the register is K2 Asset Management, a fund operating out of Melbourne, Australia that invests in pan-Asia long / short equities ex-Japan.
All Points has a long/short bias, but also invests in funds with market neutral strategies such as merger arbitrage and convertible arbitrage. In the last 12 months, the fund has outperformed MSCI's global index by 38% and returned investors 3.17% so far this year.
Also on Fairbourn's agenda was a review of pension fund activity in the region, in particular the trend for large pension plans to set up their own fund of funds. "We have been talking to a few of the large institutions in Hong Kong about helping them to establish these funds and then offering to manage them as well. They all appreciate the value of investing in a diversified alternative portfolio but few have the resources to do the necessary due diligence checks to select a group of managers and then to handle the day-to-day management of the fund of funds once it is up and running," says Fairbourn.
On a similar tack, Fairbourn says the bank is considering setting up its own pure Asian fund of funds. "In order to do this, we would need to be able to find 15 to 20 fund managers in the region that could offer us enough diversification across different strategies to ensure that our risk is spread. Now might be too early for such a fund but there is plenty of new talent entering the market and we will be keeping an eye on the situation."