Hedge execs doubt shorting value in Asia

By Jeffrey Hodgson

HONG KONG (Reuters) - The high cost of shorting stocks and a bull run in Asian markets for much of this decade means many of the region's long/short equity hedge fund managers have delivered on only half their promise to investors.

Those putting money into some long/short funds might be better off in lower-cost traditional long-only fund managers, or other hedge fund strategies with a better prospect of delivering value, some industry executives told the Reuters Hedge Funds and Private Equity Summit in Hong Kong.

Already, alternative hedge fund strategies are gaining traction in Asia, where long/short equity fund managers have dominated the industry.

"I don't think that the majority of (Asian) hedge funds have performed properly and people are getting tired of paying for the performance fees and lack of risk management. On the other hand, they're seeing that some long-only managers can perform very well," said George Long, chairman of multistrategy hedge fund manager LIM Advisors.

"What people are realizing is you can't hedge properly in Asia generally for your typical long/short equity fund. If you run the numbers it just doesn't work. So you might as well just accept the volatility and go long," he said.

Long, whose firm manages about $825 million, said there are managers who are the exception to this. But he said the challenge for the industry is that Japan and Australia are generally the region's only markets where managers can effectively short.

Elsewhere, markets are often either too restrictive or expensive, he said, noting it can cost more than 10 percent per year to short a stock in India.

BULL MARKET GORES SHORTS  Continued...