Just 20 funds cornered 56 percent of the hedge fund assets in Hong Kong, a survey by the Securities and Futures Commission (SFC) released on Friday showed.

More than 500 hedge funds in Hong Kong managed $63 billion at the end of September 2010, an increase of 14 percent from March 2009, with half of the funds managing $100 million or less. Nearly 87 percent of the hedge fund managers oversaw less than $500 million each.

US and European investors still dominated, accounting for a combined 60 percent of the funds' client base, with Hong Kong representing only 8 percent, the report said.

Other investment funds, such as funds of hedge funds, remained the largest source of investors with a 24 percent share, it added.

The number of funds slid - for the first time since data became available in 2004 - to 538 by September 2010 from 542 in March 2009.

While the hedge funds are still $27 billion short of their pre-crisis levels in 2008, assets have risen nearly sevenfold since 2004 when the Hong Kong regulator started the survey.

The number of funds in the biggest hedge fund market in Asia-Pacific - which has drawn the likes of GLG, Soros Fund Management and Paulson to set up offices - has risen about fivefold to 538 since 2004, the survey showed.

Equity long/short and multi-strategy are the two most popular strategies followed by hedge funds based in Hong Kong, accounting for nearly 65 percent of the assets.

A majority of their investments are focused on Asia-Pacific markets, with the Hong Kong and mainland markets making up 27 percent of their assets.

Most investors were from overseas, with those from Hong Kong contributing 7.9 percent to the assets, the survey showed.

The SFC surveyed 240 hedge fund managers and 62 related firms licensed for such activities.

Reuters - Bloomberg

(HK Edition 03/12/2011 page3)