EM Funds Proliferate, Assets Decline In Q2

Aug 23 2012 | 12:23pm ET

The number of emerging markets hedge funds reached a record high of 1,073 in Q2 2012, but their assets under management fell 3% from Q1, reports HFR.

Emerging markets funds now account for 14% of all hedge funds and manage $123.5 billion. HFR says the $3.7 billion quarter on quarter decline was primarily performance based—the HFRI Emerging Markets Total Index fell 6.05% in Q2 while investors pulled $256 million from EM funds.

Latin American funds saw the strongest gains, adding 3.9% through July while Russia/Eastern Europe funds added 2.3%. MENA funds were up 2.7% YTD through July.

The recently launched HFRX Emerging Markets Index, which includes all EM regions and hedge fund strategies, was up over 5.7% through August 17.

In terms of strategy, EM funds continue to focus predominantly on fundamental growth strategies (which account for 60% of all EM hedge fund capital) but new offerings have included funds focused on currency, fixed income and equity hedge strategies. Macro strategies (discretionary and quantitative/systematic CTA) now account for almost 13% of all EM hedge funds.

“Emerging Markets hedge funds delivered compelling performance in both an absolute and relative sense through the two distinct market cycles of the first two quarters of 2012, producing strong gains in the risk-on environment of 1Q12 and preserving those gains through the risk-off environment of the second quarter,” said Kenneth J. Heinz, president of HFR, in a statement.


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