SAIL Advisors, the fund of hedge fund unit of the Search Investment Group, believes there are currently attractive investment opportunities in Asia, and has increased its exposure to Asian-focused hedge funds. As one of the largest Asian-focused hedge fund investor, SAIL Advisors' current total assets under management is US$2.4 billion.

In an interview with The Asset, Harold Yoon, chief investment officer and managing director of SAIL Advisors says there is a continuing role for fund of hedge funds in the financial services industry despite the challenging market conditions which have seen other fund of hedge funds switch their business models to survive.

In today's highly dynamic markets, one of the key roles of fund of hedge funds is to have the capability to examine and evaluate the very complex risk profiles of individual hedge fund managers and present them to investors who do not necessarily have the risk management skills or experience to be able to do this.

"Our investment philosophy stems from the belief that hedge fund risk is unique and requires specialized knowledge and quantitative expertise to effectively build a robust portfolio of hedge funds. Our consistent track record of alpha generating returns and downside protection is attributable to our team of capital markets specialists who fully understand hedge fund strategies and their return drivers, understanding of the investments' directional risks, in-depth operational due diligence, and the ability to quickly identify market trends and their impact on strategies, Yoon remarks.

With fewer high quality managers in the region, SAIL adopts a more concentrated approach in its Asia focused products. The strategy overweighs higher quality managers who practice strong risk management as a key characteristic, and blends in with satellite or right-tail managers targeting higher returns with also higher risk profile. Nevertheless, high alpha generation remains the top emphasis for SAIL Advisors.

SAIL Advisors also invests in earlier stage, less established hedge funds under its Emerging Managers Fund strategy. "The earlier stage fund managers, especially in Asia, tend to have better liquidity and transparency. We try to invest with them early, when they are more open to providing greater access to the investment team, provide additional portfolio transparency, and there is the opportunity for greater upside in returns," Yoon points out.

The Emerging Managers Fund has a return target of Libor plus 600bp-800bp and a risk target of 6%-8%.

In terms of investment strategy, SAIL Advisors seeks to deliver consistent and absolute returns over different market cycles and environments by focusing on alpha generation to drive fund returns, while controlling and minimizing beta risks.

"Measurement and control of directional risks is prerequisite to making alpha investments. We put strong emphasis on bottom-up research of hedge funds and risk analysis. This means we avoid funds that are too big and funds with poor liquidity. We have a long track record of strong returns and have never invested in frauds or blow-ups. We invest only in funds where we understand the sources of risk and return," Yoon says.