Mandarin Capital: Larger does not mean better

Added 17th September 2015

With greater emphasis being on size rather than returns amid the recent financial rout in Asia, investors are no longer achieving the optimal diversification in their portfolios, Nitin Dialdas, CIO of Mandarin Capital, told Fund Selector Asia.

Mandarin Capital: Larger does not mean better

“The perception of ‘larger is safer’ has resulted in investors placing more of their funds with larger institutions at the expense of smaller fund managers. This has resulted in diminishing creativity as well as less access to smaller markets,” Dialdas said.

Dialdas added that as a result of the restrictions placed on investments, hedge funds are struggling to deliver – as seen by disappointing results over the last few years for the HFRX Global Hedge Fund Index. The performance of the index was 6.72% in 2013, -0.58% in 2014 and -1% year-to-date as at end-August. Over the same period, the MSCI World Index has returned 27.4% in 2013, 5.5% in 2014 and -2.1% as at end-August.

“It is commonly acknowledged that the best returns for hedge funds are seen early in their existence before AUM ramps up and starts limiting the scope of investments. There used to be a time when investors wanted access to the next big market, whether it was Brazil, Hong Kong or Singapore. Today, appetite for exciting markets like Vietnam and Sri Lanka are relatively subdued despite the greater access of information we have today,” Dialdas said.

Opportunities in Vietnam, Sri Lanka

He noted that in the case of Vietnam, the country is already evolving into a consumer-led service economy that will be poised to take over the manufacturing slack from China.

“We already see this happening now. With the opening up of nearly all industries to foreign ownership, it will only make the country more investible in the future. Growing consumerism is another exciting aspect to Vietnam… [the country] is where China was 15 years ago,” Dialdas said.

Dialdas is excited by the tourism industry in Sri Lanka. He noted that the country has the potential to become a regional tourism hub that could rival traditional powerhouses like the Maldives – which is far less accessible and relatively less competitive in offerings.

Investors wrestles back control through platforms

Dialdas remarked that a group of investors, those who prefer to adopt a hands-on approach, are now increasingly using crowdfunding platforms to access wider opportunities but with considerably less regulation.

“Maybe the answer isn’t related to investors at all, but rather it’s time for the regulators and the industry providers to reassess the current situation and adjust their regulations to reflect the ever-expanding sharing economy. If not, we may just see no new entrants in the industry as they simply list their offerings on the crowdfunding platforms instead,” Dialdas said.

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