Templeton's Mark Mobius is considering a plan to set up a hedge fund, the emerging market guru said in an e-mail to Reuters, a move that would mark a major shift from the traditional money manager into the $1.9 trillion alternative asset management industry.
"Yes, we are considering it," said Mobius who oversees more than $40 billion as chairman of Franklin Templeton's Emerging Markets Group. Franklin Templeton is part of U.S. asset manager Franklin Resources.
Singapore-based Mobius did not divulge details of the fund as the plan was not final yet.
Franklin Templeton's first-ever hedge fund would come at a time high profile startups such as a $1 billion plus fund planned by Goldman Sachs' star trader Morgan Sze are adding to the region's allure as an emerging hub for hedge funds.
Surging local wealth and rising interest from institutional investors in the fast growing region is attracting large American hedge funds that are looking to set up shop in Asia.
"This seems a natural evolution for Mark Mobius, and likely a very savvy business move," said Kirby Daley, senior strategist of Newedge's prime brokerage unit in Hong Kong.
"With Mark's tremendous experience on the long side, add into the mix the ability for him to short if and when he sees the opportunity, and he should have a product with wide appeal," he added.
One reason why mutual firms are branching into private equity and hedge funds is fees. For a conventional mutual fund, fees could be as low as 0.3 percent of assets or even less.
Hedge funds, however, can potentially charge up to 2 percent for upfront fees and 20 percent of performance.
Singapore's APS Asset Management, which started as a long-only fund house, said in September last year that the firm planned to focus more on hedge funds, citing potential to earn higher fees as the reason.
Henderson Global Investors on Thursday launched a global currency fund aiming to earn absolute returns, a strategy favored by hedge funds. The money manager also runs a China-focused fund that applies strategies similar to hedge funds.
"The alternative industry is becoming more mainstream and that's why traditional fund managers are launching products which are much broader than their traditional base," an industry expert, who did not want to be identified, said.
Assets under management of Asian hedge funds are expected to rise to about $165 billion by the end of 2011 from just over $125 billion now, according to data from Eurekahedge.
About a fifth of the 100 leading institutional investors in hedge funds surveyed by alternative assets research firm Preqin expressed an improvement in their levels of confidence in hedge funds in 2010, with nearly two-thirds saying that Asia will present the best opportunity in 2011.
SHORTING SEEN AS CHALLENGE
Global heavyweights such as GLG, Soros Fund Management, Moore Capital, Maverick Capital and Viking Global Investors are among the funds reported to be making a beeline for Asia.
Mark Mobius enjoys strong success in Asia, where his flagship $15.5 billion Templeton Asian Growth Fund has given investors a more than fivefold return in the past decade, making it the second best Asia ex-Japan equities fund over 10 years ending December 2010, according to data from Thomson Reuters Lipper.
Mobius took an indirect route into asset management, spending time as an analyst at international securities firm Vickers da Costa and running an independent consulting company that marketed toys in Hong Kong.
In 1987 Templeton asked him to manage the first emerging markets equity fund for U.S. investors. Mobius is a Bachelors in Fine Arts, has done a Ph.D in Economics from MIT and holds degrees in clinical and social psychology.
While the trend of long-only managers entering the hedge fund industry was gathering pace, one challenge before them was their inexperience in shorting stocks.
"Mobius' move into the alternative space is excellent news for the Asian hedge fund industry, given his pedigree and the ability to generate returns through market cycles," said Aradhna Dayal, editor of hedge fund portal AsiaHedge, in Hong Kong.
"However, investors are now clearly demanding experience on the shorting side, which remains a challenge for the long-only managers entering the Asian hedge fund space. It is a capability they will have to build up very quickly," Dayal added.
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