Asian Hedge Funds Attract $500M In 4Q 2010

Feb 7 2011 | 8:32am ET

Investors poured $500 million in net new capital into Asian hedge funds in 4Q 2010, according to a new report from Hedge Fund Research. The hedge fund research firm says investors favored strategies protecting against inflation.

HFR, a leading provider of hedge fund industry data, says that including performance gains, assets invested in Asia-focused hedge funds increased by $4.4 billion in the fourth quarter of last year to $83.4 billion—the biggest hike since 3Q 2009.

For all 2010, assets invested in Asian-focused funds grew $6.6 billion, the largest calendar year increase since 2007.

In 4Q10, the HFRX Japan Index climbed 5.87%, leading other Asian regions on both a nominal and relative performance basis. For the full year 2010, funds focused on investing in inflation-sensitive India posted the strongest gains, with the HFRX India Index gaining 15.47%. The HFRX China Index gained 9.37% for 2010, trailing other Asian and emerging markets for the full year, but preserving capital from the declines and volatility that characterized broader Chinese equity markets.

Investors favored funds which have characteristically provided inflation protection and exposure to the developing market for cross-border corporate transactions globally. In 4Q, 35% of new investor inflows went to funds focused on Asian equity markets.

Similarly, for the full year, investors allocated $765 million to event-driven Asian hedge funds, which include distressed and activist strategies. A combination of performance losses and redemptions reduced the capital allocated to Asian relative value funds, a counter trend to the rest of the global hedge fund industry. Of the four major strategies tracked by HFR, relative value funds globally experienced the largest capital inflows and produced the highest returns in 2010, furthering highlighting the disconnect between relative  value strategies in Asia and the rest of the world.

“Investors continue to allocate to Asian hedge funds but now, more than ever, have indicated a strong and clear requirement for inflation protection in their hedge fund strategies,” said HFR President Kenneth J. Heinz. “To meet this demand, the Asian hedge fund industry has evolved to offer access to not only hedged equity strategies, but sophisticated currency, commodity, volatility, corporate transaction and fixed income exposures designed to appeal to inflation-sensitive investors in 2011.”


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