HFR: Emerging Market Hedge Fund Surge Continues In April

May 12 2017 | 8:13pm ET

After coming back to life in the second half of last year, emerging markets continued to bolster the results at hedge funds exposed to them into April, according to new data from Hedge Fund Research. 

Performance has been led by Emerging Asia, including India and China, HFR reported in its latest Emerging Markets Hedge Fund Report. Indeed, the HFRI EM: India Index climbed +5.63 percent in April, extending the 2017 gain to +22.1 percent and representing the strongest start to a year on record. 

Meanwhile, investors are plowing back into the segment. Total capital invested in EM hedge funds reached an all-time high in the first quarter, rising to $205.8 billion for its third consecutive quarterly record, HFR said. 

Other highlights from HFR’s report:

  • The HFRI Emerging Markets (Total) Index was up +1.6 percent in April and has gained +7.8 percent YTD; the Index has climbed +13.8 percent in the trailing 12 months, posting gains in 10 of these 12 months. 
  • Chinese hedge funds produced strong performance to begin 2017, with the HFRI EM: China Index advancing +1.2 percent in April and +10.3 percent YTD, topping the Shanghai Composite Index by nearly 900 basis points YTD. 
  • Due to investor net outflows of $2 billion, the total capital in Emerging Asia hedge funds remained at $48.6 billion in 1Q, roughly unchanged from the year end figure, while the number of funds investing in the region was also little changed at 516. 
  • Hedge funds investing in the Middle East surged +3.1 percent in April, bringing the YTD return of the HFRI EM: MENA Index to +5.6 percent. Total capital invested in Middle East-focused hedge funds increased to $4.7 billion, managed by approximately with nearly 50 regionally focused funds. 
  • Hedge funds investing in Latin America and Russia both extended strong 2016 gains into early 2017, with the HFRI EM: Latin America Index climbing +9.9 percent through April, following a jump of +27.2 percent in 2016. Similarly, hedge funds investing in Russia/Eastern Europe have gained +3.1 percent in 2017, building on a return of +27.0 percent for the HFRI EM: Russia/Eastern Europe Index in 2016.
  • Total capital invested in Russian/Eastern European- and Latin American-focused funds both increased slightly in 1Q, ending the quarter at $29.6 billion and $6.4 billion, respectively.

"Emerging Markets hedge funds have led industry performance through geopolitical uncertainly which has defined early 2017, including falling commodity prices, expectations for higher interest rates, U.S. dollar strength, and increased risk of terrorism and military escalation," said Kenneth Heinz, president of HFR, in a statement. "Amid falling implied asset volatility and improved expectations for global growth and inflation in 2017, it is likely that EM hedge fund strategies will continue to lead industry performance through mid-year."

Established in 1992, HFR is a global leader in specializing in the indexation and analysis of hedge funds. The company produces the HFRI, HFRX and HFRU Indices, industry benchmarks for global hedge fund performance, and calculates more than 100 indices ranging from industry-aggregate levels down to specific, niche areas of sub-strategy and regional investment focus.

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