HONG KONG, Dec 8 Reuters With traditional equity and bond portfolios underwhelming investors this year and China39;s market returns letting them down, Asia39;s most active seedfund providers are ploughing money instead into hedge funds with strategies not correlated to major macro trends.

That means hedge funds may struggle to raise startup capital in the coming months unless their portfolio is set up to exploit market volatility or a futuristic theme, such as clean energy.

HS Group, a large Asiabased seed capital provider with a portfolio of alternative asset managers and assets under management AUM of more than 7.5 billion, invested in three hedge funds in 2022.

Among them is Aregence Capital Management, a Singaporebased Indiafocused equity longshort fund. Another is Mercator Partners, which runs a lownet decarbonisation longshort global strategy, buying firms in the new energy supply chain while shortselling companies with outmoded business models or growing carbon policy liabilities.

This year has really been pivotal, said Michael Garrow, chief investment officer and cofounder of the Hong Kongbased HS Group.

With central banks reducing liquidity to fight inflation, the indexes are down and many of the strategies that grew popular over the past decade are also down, meaning tech, internet and earlystage growth.

Garrow did not disclose the size of each investment but says this is an interesting time to be involved in emerging markets beyond China, because they…