UOB Asset Management has entered a strategic alliance with New York-based PlusFunds Group to offer Singapore retail and institutional investors passive exposure to hedge funds incorporated in an index created by Standard & Poor’s
The tie-up is expected to result in a listed closed-end fund, subject to approval by the Monetary Authority of Singapore, says Daniel Chan, managing director and CIO at UOB Asset Management in Singapore.
"The hedge fund industry has grown a lot over the past five, 10 years, but by and large Singapore has not participated in this," Chan says. But local investors are increasingly demanding absolute return vehicles, given the increasingly volatile equity markets. Moreover, recent MAS rules have allowed for retail access to funds.
UOB, seeking to fill the gap, decided upon a two-prong strategy.
First is to offer a passive hedge fund exposure based on an index. It decided to go with PlusFunds because it liked S&P's Hedge Fund Index, launched only this past May. "We had confidence in S&P and the integrity and robustness of its index," Chan says, adding that UOB is, he believes, the first Asian fund manager to use S&P's hedge fund indices.
PlusFunds, established in 1998, provides products for hedge fund managers and investors designed to improve accessibility and quality of information in the marketplace. Teaming with UOB gives it a foot in Asia's door marketing the S&P hedge fund index as a benchmark for alternative investing.
Using an index frees UOB from having to undertake due diligence and monitoring of hedge funds, while giving investors a broad, diverse range of strategies.
The second part of UOB's alternative investment strategy will be to form additional partnerships to launch its own actively managed fund of hedge funds.
The PlusFunds product will be sold through UOB Bank but Chan says UOB Asset Management is also in talks with potential third-party distributors.
