We always hear about hedge funds nowadays.
There seems to be a lot of hedge fund in major financial centres like HK, SG and JPN but we rarely hear them in Malaysia, do we?
So far, we have a couple of well managed mutual funds and close-ended fund, but why no hedge fund?
Is hedge fund illegal in the country?
What does it take to start a hedge fund?

This post has been edited by VesperMartini: Jan 22 2011, 02:43 PM

malaysia canot short sell

is that the only reason?

I also wonder the same question, esp after reading about warrn buffet and Monish Pabrai

All the local funds and funds raised are licensed by SC ( Security Commission of Malaysia ).

So far no licence is issued for ( local ) Hedge Fund yet, as far as I know of.

Hedge fund is basically an investment instrument that cater to high net worth individual(HNWI). In US, there are certain jurisdiction which require the investor to have a certain amount of net worth (wealth) to qualify to invest in hedge fund. Another interesting characteristic of hedge fund may be its fee structure, most hedge fund do a 2/20 structure that is the firm will charge 2% of its asset under management every year regardless of result, a rather similar feature with the management fee charge by your normal mutual fund. Then, the hedge fund also charge performance fees such as 20% of the profits above a hurdle rate, mostly set at 6% p.a.. There are some who do not follow a 2/20 structure, people like Buffett when he is running his hedge fund-like partnership have a 25% performance fee structure without the intial management fees. So, you only pay him when he make money for you. This structure is being replicated by a lot of others value-based hedge fund manager like Prabai, Burry and Guy Spier. Some other funds meanwhile charges a 3/30 structure. Renaissance technologies, the quant fund charges a whooping 40% performance fees.

The initial hedge fund do use a long/short strategy, i.e. the long and short at the same time. The reason is to achieve a decent return over any market conditions, be it a bull or a bear market. When bull market, the long will make money while in the bear market the short will make money. However, as time gone by, there are quite a few long-only fund. Prabai for instance is a long only hedge fund. So, now hedge fund do not necessary need to engage in short selling. It is now define more as an instrument for HNWI.

In Malaysia, although they do not call it a hedge fund, some of our funds looks like hedge fund. The Singapore based fund by ICapital is structure such a way that it looks like a hedge fund because it engage in a 2/20 structure. I think the initial investment is rather big too, meaning, only rich people can afford to invest. Another one is the one by Teoh Kok Lin, its fee structure and initial investment also make it looks a bit like a hedge fund.

BTW,one of the top hedge fund manager in Asia is actually a Malaysian. He is Cheah Cheng Hye, very well respected within the industry and he is running one of the biggest hedge fund in Asia- Value Partners- out of Hong Kong.

I thought one of the most powerful ones is from China, a potential to succeed WB.

thanks for the detailed reply. btw, hedge funds today are not exactly hedge funds. an investment partnership decades ago would be classified as a hedge fund today in the US. the examples you gave in the post fits into the description, i guess.

malaysia is definitely not short of financial talents but hedge fund/investment partnerships startups are pathetically low or non existent based on my simple google (not known yet). in singapore, we actually have a few running hedge funds that manage money for high net worth clients. the reasons that i could guess from my observations are; 1) tight SEC regulation 2) difficulty in raising money from high net worth clients due to transparency issues

another phenomenon i notice in the industry is the lack of global macro players. let's forget about programmed trading which is too technologically and mathematically sophisticated for most instituitions. but why no macro players? i do know some fund managers who integrate top-down investment approach as one of their strategy, like TTB ICAP and kumpulan sentiasa cermerlang. however, their major approach to investment is still the bottom-up way. i havent seen any fund managers go the purist macro way here in malaysia. for macro players, i mean the guys who invest in liquid assets which include stocks, bonds, and currencies.

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Added on January 22, 2011, 6:15 pmthat guy is li lu. he is managing a fund in US though..so i dont think he counts..

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Added on January 22, 2011, 6:21 pmwe can actually short sell in malaysia with regulated short selling. but the lengthy process involved and low liquidity prevents most people and instituitions to perform it. nevertheless, we can still play the bear side of the index using futures.

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Added on January 22, 2011, 6:23 pmhttp://www.eurekahedge.com/news/10_hf_awards.asp

the link lists some of the award winning hedge fund in asia. worth to take a look.

This post has been edited by VesperMartini: Jan 22 2011, 06:23 PM

KWSP is our hedge fund, now busy doing shooping for distressed assets in UK.

When hot money enter, kwsp exits.

should we follow them (kwsp) haha

haha....
i think did exist, just that they have a cover...
"UXXX" boys are running it....

any forumer knows how unit trust buys shares? do they buy in huge bulk? or many small lots?
is 'programmed trading too technologically and mathematically sophisticated for most instituitions'?
do we really 'lack of global macro players'? if bring a butter knife to a gunfight, of coz kenot compete global la

do unit trust use sharebrokers to sit in front of pc & key in order daily or use technology to break down their huge order into small batches?
do most hedge fund use technology or they prefer to stay in the stone age

no idea & use google search to pick up khabar angin, just read for fun & no need get so uptight, coz no fund manager read lyn & dun think they use siput method to invest either

http://www.bloomberg.com/news/2010-10-06/t...ew-cowboys.html

http://www.cross-currents.net/charts.htm

http://hftsecurityrisk.com/

Let’s say you are a mutual fund that wants to buy one million shares of Microsoft (MSFT). This is such a large order that you are worried that you may move the market up with your trade. Therefore, in order to make sure you don’t pay more than you want per share you put in a limit order. Let’s say the stock is trading at $24.95 but you put in a limit order (i.e. the most you are willing to pay) of $25. Many mutual funds use what are known as VWAP (Volume Weighted Average Pricing) trading algorithms to execute these large trades. The problem with these algorithms is that even if they break up the buy orders in smaller batches (i.e. not all one million shares in a single trade) they create patterns that the HFT algorithms can sniff out.

http://inoculatedinvestor.blogspot.com/201...e-stealing.html

Smaller exchanges have to pass along big orders to the big exchanges if it looks like they can't fill them. To avoid this loss, they "flash" these orders to big customers for less than half a second. The hope is that big players will help fill the order, splitting the fees with the small exchange.

But this also gives the insider an advance look at a trading price you and I never see. Mind you, it's a half-second advantage; you and I couldn't do anything with it anyway. But those with HFT systems can. Here's another thing about flash orders that doesn't seem fair. By pinging most of the market every few milliseconds, a good HFT system can sense overall supply and demand for a stock. When it sees a flash order to buy a stock for which it knows there's limited supply, it'll go out and sop up all the available stock ahead of that order. It can then resell the stock quickly for a profit.

"They know about the order and can beat everyone to the stock because they have a faster system," says one hedge fund manager. "They front-run and drive the price up ahead of everyone else.

http://articles.moneycentral.msn.com/Inves...ors.aspx?page=3

A third of all EU and US stock trades in 2006 were driven by automatic programs, or algorithms, according to Boston-based financial services industry research and consulting firm Aite Group. Most strategies referred to as Algorithmic Trading (as well as algorithmic liquidity seeking) fall into the cost-reduction category. Large orders are broken down into several smaller orders and entered into the market over time. This basic strategy is called "iceberging"

http://www.cross-currents.net/charts.htm

http://www.nobletrading.com/algorithms.php

http://www.businessweek.com/news/2010-03-3...-in-stocks.html

http://www.barx.com/equities/algorithmic/index.html

http://corp.bankofamerica.com/public/publi.../ets/agencyalgo

How do we perform short sell in malaysian share market, I noticed some of the counters are actually allow to do short selling, but online trading just doesn't allow us to do it.

Regulated short selling - Yes, allow on specific stocks.
But this service/product like dead and buried, nobody interested.

Just like individual stock futures, SSF. No transaction, no quotation, nobody care.

thanks for such informative thread for kampung gia like me

There are a lot of very "private" hedge funds, where someone manages money for relatives, or a group of high net worth individuals..

Equinas is a hedge fund right?

Equinas is more pf a private equity firm, btw, so far, i've never really heard of any hedge fund in Malaysia,but i do heard of one or two private equity firms in Malaysia, one of them who is quite active and in the limelight now would be the Navis Capital group of people, who are now buying into SEG edu grp and also some other stakes purchasing.

so ... are there any hedge funds in Malaysia? why is short selling not allowed? what is the rationale behind it?

short sell has maximum fixed profit while the loss is unlimited.

This post has been edited by siew14: Jul 17 2013, 06:22 PM

A lot of countries now ban short-selling not only Malaysia. Anyway there are several hedge-funds operating in Malaysia which are based in Singapore.

Well, I am running my own hedge fund, albeit a micro fraction amount of capital compared to US-based hedge funds.

is it illegal in malaysia to have their own private hedge funds without license from securities commission ?

do we get fine if get caught?

Any fund manager must be licensed by the SC. So yeah it's illegal