Hedge funds in emerging markets

The paper outlines hedge fund activities in Asia and Hong Kong based on data from the Securities and Futures Commission in Hong Kong and private research fi rms specialised in hedge funds. In terms of growth, investment strategies, use of leverage and investor base, hedge funds in Hong Kong display characteristics similar to those of hedge funds investing in Asia’s emerging markets. Various financial sectors’ exposures to hedge funds remain small across the region and certain Asian markets are observed to be at the forefront of an international movement to enhance the oversight of hedge fund activities. However, the paper has highlighted the need for regulators to be aware of the potential concerns on hedge fund activities including the systemic risk on fi nancial stability, investor protection challenge and the risk of settlement failure. Finally, the paper proposes to enhance the effectiveness of regulating hedge fund activities in the region through continued vigilance on counterparty risk management, enhancement on collection of data, improvement on cross-border and cross-market sharing of information as well as regulatory cooperation.