Hedge funds eye Asian growth as Bolton heads east

London : Fidelity's Anthony Bolton is unlikely to be the last top UK investor to move to Asia as hedge funds seek attractive investment opportunities and cash-rich clients hungry for absolute returns.

While not strictly a hedge fund manager, Bolton made his name as shrewd manager of Fidelity's top-performing Special Situations fund, and on Thursday the firm said he will return to managing money by running a new China investment portfolio out of Hong Kong.

He is one of a growing army of fund professionals to show interest in the region.

New entrants

TCI has decided to close up shop after some high-profile failures in its activist strategy, but fellow hedge fund firms Four Elements and Orchard Capital Partners, launched by former managers at Stark Investments, are among new firms in the region.

Davide Erro — a former manager of the Hong-Kong and London-based Gandhara hedge fund forced to shut up shop earlier this year — plans to launch a stock fund next year from his Hong Kong base, according to the Wall Street Journal.

Marshall Wace has also opened an office in the region in recent years.

"We are seeing a lot of high-quality managers launch in Asia," said one prime brokerage executive who declined to be named.

Hedge fund industry executives say managers are attracted by the region's large variety of investment markets with different characteristics, including Australia, Japan and China.

Meanwhile, firms are also drawn by strong outperformance from the region — the MSCI AC Asia excluding Japan index has jumped 66 per cent this year, more than double the 32 per cent gain from global equities.

"There are a lot of launches of Asia-focused funds located in Asia — there have been around 50 funds," said Eddie Guillemette, managing director in Bank of America Merrill Lynch's prime brokerage business.

"The performance of emerging markets has encouraged people. The bet is that Asia will be the place to be in the next two-to-five years."