Australia 'too far away' for investors

SYDNEY: After a decade running Sydney-based hedge fund Commodity Strategies Ltd, founder Rob Holroyd is planning a move to New York or Switzerland in search of cash.

Investors have increased due-diligence after Bernard Madoff's Ponzi scheme, and scrutiny is likely to be heightened following hedge fund manager Raj Rajaratnam's insider trading case, Holroyd said. That's hampering his bid to boost assets to $2 billion from about $170 million as overseas investors aren't willing to spend the time and money needed to complete reviews of Australian-based funds, he said in an interview from New York.

"People keep saying, 'You must be crazy if you think you can run your business from Sydney,'" he said. "This whole Madoff thing has really scared the living daylights out of people. The whole level of 'we need to keep an eye on these guys if we're allocating them money' has gone up significantly."

While Australia weathered the financial crisis better than most developed economies, its hedge fund industry didn't. Assets managed by the nation's hedge funds plunged 43 percent from a 2007 peak to August, according to data from industry researcher Eurekahedge Pte, compared with a 26 percent drop globally.

Investors looking at Asia-Pacific managers tend to head to Singapore, which has grown its industry from near zero in 1997, or Hong Kong, where most China-focused funds are based, Eurekahedge said in its September report.

Meanwhile Australia, among the region's first hedge fund centers, is "a little far off, thus less accessible and more expensive to reach", it said.

The decision to bypass Australia comes even as its managers outperform this year. Single funds returned 17.6 percent in the nine months to September, according to Australian Fund Monitors, compared with the Eurekahedge Fund Index's 16 percent advance.

"We are seeing investors traveling to Asia again this fall, though the numbers traveling onto Australia have not recovered by the same level as yet," said James Fallon, director, financing sales Asia-Pacific at Bank of America Merrill Lynch in Hong Kong.

Bloomberg News

(China Daily 11/09/2009 page11)