Australia: ASIC review of hedge funds sector


The Australian Securities & Investments Commission (ASIC) has provided an overview of the Australian hedge funds sector and included in its report the results of ASIC's 2014 hedge funds survey, which covers the 12 months to 30 September 2014. The survey was conducted partly in response to the request made by IOSCO of its members to survey their large hedge fund managers, and reflects continuing regulator interest in the sector. ASIC's 2014 hedge fund survey collected data from 18 Australian based managers (each with more than $571 million in hedge fund assets under management) and referenced 27 hedge funds which had assets under management of $37.1 billion (two of these funds were based outside of Australia).

The survey also includes separate findings from a review into the hedge funds sector based on aggregated data collected by ASIC from commercial providers.

Key points and trends of the survey

The following sets out some key conclusions drawn from the 2014 hedge funds survey (including a comparison with the 2012 results) as described in the report:

  • Size of market: Single manager hedge funds and funds of hedge funds continued to comprise a small proportion of the Australian funds management industry, managing 3.5% and 0.5% (respectively) of all Australian managed fund assets. The surveyed managers reported significant positive applications in every month of the survey year.
  • The surveyed participants indicated an increase in retail participation: Direct retail investors accounted for 17% of all hedge fund investors (by NAV) and approximately 49% were retail coming in indirectly through an investor directed portfolio service. We have assisted a number of managers extend their product offering into the retail market, including by seeking to address the robust disclosure regime dictated by ASIC. Notably, the industry approach to addressing the ASIC mandated benchmark and disclosure principles were not canvassed in the survey.
  • Strategy: The most common strategy employed by managers for operating single-manager hedge funds and funds of hedge funds was equity long/short (representing 56% of overall surveyed NAV).
  • Asset exposure:
    • listed equities and cash were the largest net asset exposures in the survey data, at $26.3 billion and $5.7 billion respectively. This is broadly similar to the findings in 2012 and reflects the focus on long/short equity strategies by the surveyed participants.
    • Fixed interest derivatives had the largest gross market value (GMV), at $32.3 billion.1 For this purpose, GMV is the absolute sum of the fair market value of all long and short positions. It was acknowledged however that this represented a much smaller exposure on a net basis.
    • Asset exposure to commodity derivatives fell over the review period.
  • Use of leverage: While the gross leverage ratio (GNE to NAV) for surveyed hedge funds has increased since 2012 (with synthetic leverage being the largest source of leverage), the level of leverage for these funds is still relatively low compared to other jurisdictions. Synthetic leverage, primarily from collateralised borrowing via a prime broker, was the largest source of leverage and was 6 times higher than 2012 levels.
  • Geographic exposure: The highest geographic exposure is now North America with 29% of NAV invested there (up from 15% in September 2012). Australia and Asia (ex-Australia) were also significant regions for the funds' investments, with each receiving around 26% of the total NAV. Contrast this with 2012, when Australia had the largest percentage of the funds' investments, with 38% of NAV.
  • Liquidity: Most of the surveyed hedge funds said they could liquidate 89.5% of their portfolios (portfolio liquidity) in less than 30 days and could face redemptions on 81.8% of fund liabilities (investor liquidity) in less than 30 days. In 2012, 30-day portfolio liquidity was 92% and 30-day investor liquidity was 99%. All of the funds surveyed had the right to temporarily suspend investor redemptions (no fund reported having used this right in 2014). Also, unlike other jurisdictions, the surveyed funds reported negligible use of both illiquid asset side pockets and redemption gates.
  • Turnover: Overall portfolio turnover was stable compared to 2012. The vast majority of turnover was in interest rate derivatives. The surveyed hedge funds did not report a wide use of high-frequency trading strategies.
  • Clearing: On average, nearly 75% of derivatives volumes traded on regulated exchanges, rising dramatically from 56% in 2012. Notwithstanding recent mandated central clearing initiatives, of the 28% of derivatives that were traded over the counter, on average only 3% were cleared by central clearing counterparties.
  • Performance: Annual net investment returns of surveyed hedge funds reported returns of 15.6%, compared to 5.9% for the S&P/ASX 200 Accumulation Index, and almost double and 4 times returns in 2012 and 2010 (respectively).

In conducting the surveys between 2012 and 2014, ASIC reduced the number of survey data points (mainly to assist the surveyed hedge funds in providing the relevant information in an efficient manner). Among others, these changes included adopting a broader definition of a 'hedge fund', in line with the definition used by IOSCO—that is, a fund that presents a combination of some of the following characteristics: (i) use of leverage, (ii) performance fees based on unrealised gains, (iii) complex strategies, which may include use of derivatives, short selling, high-frequency trading and/or the search for absolute returns, and (iv) a tendency to invest in financial rather than physical assets.

What does this mean?

The aggregated data collected from these managers was submitted to IOSCO's global hedge fund survey project.While the survey fits into a bigger international initiative, data collected by ASIC from the survey will inform its approach to the sector, possibly including any changes to ASIC's mandated hedge fund disclosure principles.


1Fixed income derivatives were classed as their own asset type in ASIC's 2014 hedge funds survey. In 2012, fixed income derivatives were included in the underlying fixed income asset classes.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.