Financial Risk Management to up Asia investment

By Jeffrey Hodgson

HONG KONG (Reuters) - Financial Risk Management (FRM), a $15 billion (7.6 billion pound) fund of hedge funds manager, expects to increase the percentage of its assets invested in Asia as part of its recent expansion in the crowded but high-growth market.

The London-based firm is also looking to double the size of its recently opened five-person office in Hong Kong within 18 months because of the growing number of investment opportunities in Asia, said Paul Dunning, chief executive of its FRM Ltd (London) division.

"Finding a really good hedge fund for the first time ... is a kind of eureka moment. There's a real conviction and passion that comes with finding a great manager. And it didn't happen very often here. Now it's happening more often," he told Reuters in an interview.

The firm already has established roots in the region, having opened its Tokyo office in 2000 and Sydney office in 2001. Japan's fifth-largest bank, Sumitomo Trust & Banking Co Ltd (8403.T: Quote, Profile, Research, Stock Buzz), took a 2.5 percent stake in 2005.

FRM, which was founded in 1991 as a hedge fund research firm, sources roughly 40 percent of its assets from Asia, with most of that coming from Japanese institutional investors like pension funds.

Funds of hedge funds are a popular investment choice with many pension funds because of their stated goal to deliver steady returns in both rising and falling markets. Many pension managers are attracted by the prospect of an asset class in which returns aren't correlated to more traditional stocks and bonds.

However, unlike traditional equity and bond fund managers, most funds of hedge funds charge both management and performance fees, on top of similar fees charged by the underlying hedge funds themselves.

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