Asia's wealthy start to go alternative

By Michael Flaherty

TOKYO (Reuters) - Asia's wealthy are increasing their investments in alternative assets such as hedge funds, marking a turnaround in a region where the rich have preferred to lock their money into property and savings accounts.

More and more, high-net-worth individuals from China to Japan, led by a new wave of wealthy, are tapping private bankers to explore money pools involving everything from hedge funds to private equity, experts at the Reuters Wealth Management Summit said this week in Tokyo.

"There's a developing sophistication and a developing appetite for a diversified asset class," said Mark Devadason, CEO of Standard Chartered Bank's Japan unit (STAN.L: Quote, Profile, Research, Stock Buzz)(2888.HK: Quote, Profile, Research, Stock Buzz). In Japan, some wealthy investors have become impatient with low-growth investments and are looking at international offerings, he added.

That move follows a similar trend across the world, as alternative assets such as hedge funds, private equity, infrastructure and commodities have attracted big money from wealthy individuals and institutions seeking to boost returns.

The trend comes despite poor investment performance and $6 billion of losses at U.S.-based energy hedge fund firm Amaranth.

Long/short hedge funds were up just 5.5 percent for the year as of the end of June, a survey by ICBI showed. The survey showed that less than 10 percent of those who responded expected average hedge fund returns to be more than 9.5 percent in 2006, well below the 12 to 15 percent that many were expecting after a strong first quarter.

Japan's retail investors held 430 billion yen $3.7 billion) in hedge funds at the end of March, a sixfold increase from 70 billion in assets under management in March 2000, according to Japan's Financial Services Agency.

But overall, Japan's wealthy allocate just 2 percent of their portfolios to alternative products, according to Nomura Research Institute Ltd. (4307.T: Quote, Profile, Research, Stock Buzz)  Continued...