A snapshot of the Australian hedge fund industry has been released by the Australian Securities and Investments Commission (ASIC), providing data on 27 qualifying funds holding almost 45 per cent of assets in single-manager funds in this country.
The last survey on hedge funds in Australia was conducted in 2012, with one finding including that there was no real evidence hedge funds posed a significant systemic risk, and while that remains true, there have been some new developments.
The key points of the survey results are:
Hedge funds account for a small percentage of Australia’s managed funds industry, with just $95.9 billion out of a total of $2,407 billion industry-wide. This is made up of $83.7 billion in single-manager hedge funds and $12.7 billion in funds of hedge funds managing 3.5 per cent and 0.5 per cent respectively of Australian managed fund assets. Over half of these funds hold less than $50 million in assets each.
Since 2012, gross leverage ratios (gross notional exposure to Net Asset Value (NAV)) have increased, with the median gross leverage ratio in 2014 two times NAV, in contrast to 1.7 times NAV in 2012. Surveyed leverage levels is relatively low when compared with other jurisdictions.
In the surveyed hedge funds, retail direct investors account for 17 per cent of investors by NAV, with these funds reporting that almost 49 per cent of investors by NAV used an Investor Directed Portfolio Services (IDPS) to access hedge funds. IDPS participation since the last survey has been attributed to several factors, including a lack of detailed information provided by managers regarding investment types and changes to how the managers’ classify investors.
Large exposures were reported due to interest rate derivatives – gross notional exposure is sitting at more than $64 billion as at 30 September 2014.
Geographically, exposure to North America is most prominent, with 29 per cent of NAV investments made within its coastlines. Australia and Asia (ex-Australia) are also regions with significant investments, each landing 26 per cent of the total NAV.
Listed equities – by asset class – were the greatest exposures, netting $26.3 billion in investments. Exposure here was much higher than the second-largest asset class, which was cash, sitting at $5.7 billion. This correlates with the 2012 report which found the same two largest asset classes.
Positive net applications sat at $5.1 billion over the 12 months to 30 September 2014, and consisted of $10 billion in applications and $4.9 billion in redemptions. Median net applications were positive in every year to 30 September 2014.
The IOSCO hedge fund project
The International Organisation of Securities Commissions (IOSCO) called upon its members in 2010 and 2012 to survey the largest hedge fund managers in their jurisdictions so the international community could further their understanding on the systemic risk posed by hedge funds, and to garner further insights into the industry as a whole.
The latest report uses 2014 data from Australian hedge fund providers that had over US$500 million under management, with all data going towards IOSCO’s global hedge fund survey project.