BlackRock launches absolute return hedge fund for retail investors in Singapore and Hong Kong

Business Times

18-06-2025

[SINGAPORE] BlackRock has launched an Asia-Pacific-focused hedge fund for retail investors in Singapore and Hong Kong, the world's largest asset manager with US$11.6 trillion in assets under management announced on Wednesday (Jun 18).
The fund, titled the Systematic Asia Pacific Equity Absolute Return Fund, employs a market-neutral strategy that is designed to be resilient to volatility in the broad equity markets by taking long and short positions in select stocks.
Put simply, 'the strategy aims to give you non-market-driven returns', said Dennis Quah, head of Singapore wealth at BlackRock, in an interview with The Business Times.
'We pick stocks that we expect to do well, taking a long position on those, and take a short position (on) stocks that we expect not to do well. And we do it with a systematic investing approach,' he explained.
A short position is the monetising of a stock-price or asset-value depreciation, he added. 'If you expect something to go up in value, you take a long position. If you expect something to go down in value, you take a short position.'
The fund, which was open to institutional investors in Singapore in 2017, had US$727 million in net assets as at May 31, 2025, and more than 2,800 holdings. In 2024, it delivered a 23.7 per cent return, according to the fund fact sheet.
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'In Singapore, the fund is available in UOB personal financial services, Citibank Singapore and other platforms,' a spokesperson said.
Vital for investors to understand the approach
Part of the challenge in launching a hedge fund for retail investors is ensuring that they understand the investment strategy, and managing the negative impressions people have of hedge funds.
'To those who are not familiar with hedge funds, some words that typically get associated with them, are risky, heavily leveraged, dangerous, opaque, black box… Hedge funds as a category of investment product generally have had a negative connotation to it emanating from past crisis events such as the Asian financial crisis (and) the global financial crisis,' Quah admitted.
'But if you actually break down the word hedge fund – hedging means, actually, to reduce risk, not necessarily to increase it. So a hedge fund is actually, by construct, supposed to hedge away the risk that you don't want, to isolate the risk that you want,' he said.
Given the right framework and in the right hands, hedge funds can add value to a portfolio, he added. However, he warns that the fund should not be consumed on its own, but be commingled with a larger portfolio.
In BlackRock chairperson Larry Fink's 2025 annual letter to investors, he said that the future standard portfolio will no longer be 60/40, where 60 per cent of assets are allocated to equities and 40 per cent to bonds. Instead, he noted, the proportion would be 50/30/20 – with 50 per cent and 30 per cent allocated to stocks and bonds, respectively, and 20 per cent to alternatives.
Still, the fund is not without its risks, conceded Quah. It might not deliver returns if the portfolio managers get the investment strategy wrong by consistently going long on the companies that lose value and going short on the companies that rise in value.
Also, if the dispersion between good and bad-performing companies narrows dramatically where everything goes up or down at the same time, there will be little or no opportunity to make money or deliver absolute positive returns.
'So that's an extreme situation that we don't expect to happen for protracted periods of time. It may happen sporadically, like what we saw with the Magnificent Seven a few months ago, but, even then, you saw that massive mean reversal later on,' he said. The Magnificent Seven refers to the top seven mega-cap companies in the S&P 500, and includes Alphabet, Amazon, Apple and Meta.
The fund has also put in place risk-mitigation measures, he added. 'We have a very diversified approach. We have 2800 securities in this portfolio, so it runs systematically. No one human being can manage that number of stocks in one portfolio on a purely fundamental basis. So we combine human expertise with technology to help us implement the investment strategy.'
BlackRock's systematic platform brings research and measurement techniques to the investment process with the use of data and technology. This involves using machine-learning systems to weight investment signals that indicate how companies might perform – from tweets by chief executive officers, to public sentiment about a company that might indicate fundamental data such as sales and revenue numbers, for instance.