Hedge Investors Banking On Emerging Markets
Monday, August 29, 2011
Total capital invested in Emerging Market-focused hedge funds increased by
USD1.4bn during the second quarter, including new capital inflows of over USD300m
and performance-based returns of USD1.1bn, according to data released August
24 by HFR (Hedge Fund Research, Inc.).
The second quarter represents the fourth consecutive positive quarterly inflow
as well as the fourth consecutive quarterly increase in overall Emerging Markets
(EM) hedge fund assets, and brings total assets invested in EM hedge funds to
USD123bn, a new record.
“Through mid-year 2011, the decoupling and divergence of Emerging Markets
from their developed market counterparts has become increasingly evident and
significant, and can be seen across currencies, sovereign debt, and different
types of hedge fund exposure,” said Kenneth J. Heinz, President of HFR.
“As risk aversion has increased through mid-2011, investors are increasingly
looking to Emerging Market hedge funds not only for continued secular economic
growth, but also for tactical exposure to macroeconomic trends, currency stability,
and hedged, uncorrelated exposure to developed market equities. A likely continuation
of these trends will drive capital growth in EM hedge funds in the second half
of 2011,” he added.
Overall Emerging Market hedge fund performance was muted through the first
two quarters of the year, with the HFRI Emerging Markets (Total) Index essentially
flat (0.0%) while the HFRX Total Emerging Markets Index gained +0.67%, both
through July.
Positive contributions from EM exposure in funds investing in Russia and Latin
America has been offset by Emerging Asia and Latin America, the HFRI EM: Russia
Index gained +3.6% through July, while the HFRI: EM Asia (ex-Japan) Index has
posted a decline of -1.9%.
While the number of EM hedge funds globally remained relatively constant at
just over 1,000 as of the end of Q2, EM hedge funds represented over 10% of
global hedge fund launches and over 16% of liquidations in the most recent quarter.
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