The $198.4 billion1 Asia-Pacific hedge fund industry is thriving, but new launches are still under pressure. To stand any chance of winning institutional mandates in today’s ultra-competitive market, start-up hedge funds must ensure their technology stacks are robust and future ready.
Asia-Pacific Hedge Funds – A Solid Market, But New Funds Face Headwinds
After capitalizing on volatility, China’s macro uncertainty, and opportunities in artificial intelligence, Asia-Pacific hedge funds delivered average returns of 12.1% in 2024 - their strongest performance since 20092.
The results have reignited investor interest. According to BNP Paribas’ Capital Introductions Group, more than a quarter of allocators — overseeing $1.4 trillion in hedge fund assets — plan to increase allocations to Asia-Pacific strategies. That’s a sharp jump from just 2% in 20233.
Yet new launches still face formidable headwinds. Institutional flows continue to favour established managers, as many allocators remain reluctant to take career-defining risks on smaller funds.
Fundraising is still possible, but the bar is higher. With investor demand outpaced by fund supply, allocators are digging deeper in due diligence and demanding more than performance alone. Robust and scalable technology infrastructure is now a critical factor in manager selection. Successful start-ups treat technology with the same rigor as investment strategy. Four key decisions often determine whether a manager scales or stalls.
1. Choose Institutional-Grade Technology Providers from Day One
To win institutional mandates, start-ups must align with best-in-class technology providers. These providers should offer scalability, integration with other core service partners (such as administrators and prime brokers), seamless data management, and workflow automation.
While many systems support start-ups well in the early years, they can struggle as AUM grows and operational complexity increases. If a manager outgrows its technology platform, re-building or re-platforming later can be costly and disruptive.
By contrast, getting technology right from the outset — and automating processes such as trade execution, NAV generation, and reconciliations — ensures efficiency and operational robustness. Conversely, a poorly executed technology approach creates inefficiencies, risks, and unnecessary costs.
Investors will expect assurance that managers have chosen quality providers.
2. Low Price Now = Costly Later
Although start-ups often face financial pressure, cost should never be the sole factor when building a technology infrastructure. Opting for the cheapest solution is frequently a false economy: substandard systems may suffice in the short term but often require complete replacement within just a few years — at significantly higher cost and disruption.
A sometimes slightly more expensive, higher-quality solution from the outset typically pays dividends over the long run and demonstrates to investors that the manager is serious about building a sustainable business.
3. Cybersecurity and Data Hygiene Are Non-negotiable
Cybersecurity incidents and data breaches are now commonplace — including within the asset servicing industry. Investors demand clear evidence that managers take these risks seriously, with the appropriate guardrails, governance, and safeguards firmly in place.
Regulators are taking a tougher stance as well. Both Singapore and Hong Kong authorities are focusing more closely on cybersecurity and operational resilience, heightening expectations for hedge funds operating in the region.
4. Make Risk Management Real-Time
Given ongoing market volatility and geopolitical uncertainty, the ability to monitor risk in real time is essential. Investors want managers to partner with providers that deliver robust, real-time portfolio risk management solutions.
Consistent oversight reduces the chance of erratic returns — something investors are keen to avoid.
Building a Competitive Edge
Combined with a solid performance track record, a well-designed and effectively managed technology infrastructure can provide start-ups with a critical edge in securing investor mandates. In today’s highly competitive fundraising environment, technology is no longer just an enabler — it’s a differentiator.
The hedge funds that succeed won’t be the ones that cut corners on technology, but the ones that design for scale from day one. By getting the foundations right now, start-ups position themselves to grow seamlessly, adapt to new strategies, and earn investor confidence as they expand.
1 Broadridge Global Market Intelligence
2 Reuters – January 16, 2025 – Asian hedge funds’ performance best in 15 years
3 BNP Paribas – February 10, 2025 – Coming up Trumps: Allocators to add to hedge funds as alpha rises
