Morgan Stanley, Asia-Pacific’s (Apac’s) second-largest prime broker, picked up more than 30 new mandates to provide services including clearing trades, securities and cash lending to hedge funds in the region this year.
About a third of the mandates came from startups, and the rest from existing managers adding funds, said Richard Webb, a Hong Kong-based managing director in Morgan Stanley’s prime brokerage division.
“Our focus is to target high-profile startups and new fund launches from existing managers,” said Webb in an interview yesterday. “There were few new launches in the first quarter, but activity has picked up significantly since.”
Hedge fund growth renewed this year after investment losses and record withdrawals shaved 25 per cent off global industry assets in 2008, according to data from Chicago-based Hedge Fund Research (HFR). Industry assets expanded by $34 billion in September, the fifth consecutive month of increases, helped by $15 billion of net inflows, said Singapore-based data provider Eurekahedge.
“Over half of the industry’s global managers have seen inflows in the third quarter with equity and macro strategies key beneficiaries,” Webb said, citing HFR data.
“We expect Asian managers to follow suit, most likely by the first quarter 2010.”
Morgan Stanley had 198 prime brokerage mandates in Apac, with a share of regional hedge fund assets second only to Goldman Sachs Group, a May report by London-based AsiaHedge said.
New York-based Morgan Stanley, estimated to have commanded 23 per cent of the global business in 2007, lost its largest prime broker standing last year, according to Sanford C. Bernstein & Co. research. It has become more selective in choosing clients, Bernstein analyst Brad Hintz wrote in a March 13 report.
Morgan Stanley is recovering ground after its conversion into a bank and a $10 billion government bailout last year helped shore up client confidence amid concerns about being caught in a repeat of the September 2008 bankruptcy of Lehman Brothers Holdings as its stock and bond prices fell.
There have been 52 Asia-focused hedge fund startups and 42 new funds started by existing managers in the region this year, according to Eurekahedge.
“It is now more resource-intensive to set up new funds and investor demands on infrastructure and risk management controls continue to rise,” said Webb.
UBS had been approached by about 50 potential hedge fund startups in the Apac region this year, David Gray, its head of prime services, said last month without mentioning the number of mandates added.
The Swiss bank was the region’s third-largest prime broker, with 211 mandates, yet commanded a smaller share of hedge fund assets than Goldman and Morgan Stanley, AsiaHedge estimated.
The bulk of the new funds that Morgan Stanley is seeing will be based in Hong Kong, with an increasing number of managers starting China-dedicated strategies, Webb said.
Morgan Stanley plans four more senior prime brokerage sales and capital introduction hires in the fourth quarter in Hong Kong, Tokyo and Sydney, Webb said. Capital introduction services help match hedge funds seeking money with potential investors. Mark Javed will join Morgan Stanley in Sydney next week and Yasumitsu Iwasa in Tokyo, focusing on the two areas, Webb said.
Last month, Morgan Stanley held its annual Asia hedge fund capital introduction conference in Hong Kong.
Forty-four managers, including startups and established companies, met with 150 investors, according to Webb.
