Investors Retreat From Asian Hedge Funds

Nov 14 2008 | 11:52am ET

Assets invested in hedge funds focusing on Asia fell sharply in the third quarter of 2008, as a combination of performance-based losses and investor withdrawals affected funds across all Asian regions and strategies.

According to data released today by Hedge Fund Research, investors withdrew more than $3.4 billion, resulting in a 13% decline in the size of the Asian hedge fund industry, which fell from $100 billion to $87 billion in total assets.

Equity hedge funds saw the largest outflows in the quarter, with investors withdrawing $2.9 billion. Investors also pulled $366 million from event-driven and $196 million from relative-value strategies.

The percentage decline in Asia-focused assets slightly exceeded those experienced by the global hedge fund industry for the quarter, which saw assets under management fall by 11% from $1.93 trillion to $1.72 trillion.

The total number of hedge funds investing in Asia also fell slightly, from 1,078 in the second quarter to 1,065 at the end of the third quarter.

“Losses in the third quarter of 2008 represent an incredible contrast to the third quarter of 2007, in which hedge funds investing in Emerging Asia gained 8.7%,” said Kenneth Heinz, president of HFR.

“The combination of a slowing global economy and ongoing financial crises presented challenges this past quarter; however, into 2009, Asian hedge funds will be responding to increased government economic stimulus and corporate acquisitions, which are likely to have a broad impact on liquidity and structure of financial markets.”

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