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Emerging markets hedge funds lead industry into 2011

Friday, February 18, 2011
Opalesque Industry Update - Emerging markets hedge funds posted industry-leading gains in 2010, led by funds with regional exposure to Russia and the Middle East, according to Hedge Fund Research, Inc. (HFR), the leading provider of hedge fund industry data. As a direct result of these gains, assets invested in emerging market (EM) hedge funds increased by nearly $10 billion in the fourth quarter to end the year at more than $114 billion, approaching the record level of AUM for EM hedge funds set in 2007.

The HFRI Emerging Markets (Total) Index gained +11.79 percent for 2010, topping the gain of +10.30 percent for the HFRI Fund Weighted Composite Index, the leading benchmark of global hedge fund industry performance. EM performance in 2010 follows gains of more than 40 percent in 2009 and is particularly significant considering the EM volatility which characterized 2010. Several regional EM equity markets posted declines for the year and the HFRI EM (Total) Index posted gains in only six of the twelve months in 2010.

Middle East-focused funds posted the strongest gains among all EM regions, with the HFRX MENA Index gaining +22.67 percent for 2010. This was followed by the HFRX Russia/Eastern Europe Index, which gained +21.60 percent for the year; the HFRX Multi- Emerging Markets Index, comprised of funds investing globally across several emerging market regions, posted a gain of +17.34 percent.

Fourth quarter EM inflows highest in over 2 years
Investors allocated over $500 million in net new inflows to EM hedge funds in 4Q10, the largest quarterly inflow since 2Q08, reversing the trend of capital redemptions and investor risk aversion that had characterized the last nine quarters for EM hedge funds. Total capital invested in EM hedge funds peaked at over $116 billion in 2007 before drawing down to a post-financial crisis low of $66 billion in 1Q09. EM fund managers have expanded the number of funds compliant with UCITS III guidelines; in total, more than 140 Emerging Market hedge funds are presently UCITS III compliant.

“As the global economic recovery accelerates into 2011, global investors interested in accessing superior growth characteristics will continue allocating to Emerging Markets hedge funds,” said Kenneth J. Heinz, President of Hedge Fund Research, Inc. “EM hedge funds allow investors to access local market expertise via sophisticated strategies and have demonstrated the tactical flexibility to manage through the challenges presented by inflation, liquidity, sovereign debt and currency instability inherent in EM investing.”

(press release)

HFR opens China office
HFR is pleased to announce that it has established an office in China to better service Asian investors, clients and financial media inquiries regarding the global hedge fund industry. Jia (Josh) Gu has relocated to China and will manage this office. Josh’s contact information is as follows:, +86.15928870321.

About HFR
Hedge Fund Research, Inc. (HFR) is the global leader in the alternative investment industry. Established in 1992, HFR specializes in the areas of indexation and analysis of hedge funds. HFR Database, the most comprehensive resource available for hedge fund investors, includes fund-level detail on historical performance and assets, as well as firm characteristics on both the broadest and most influential hedge fund managers. HFR has developed the industry’s most detailed fund classification system, enabling granular and specific queries for relative performance measurement, peer group analysis and benchmarking. HFR produces over 100 indices of hedge fund performance ranging from industryaggregate levels down to specific, niche areas of sub-strategy and regional investment focus. With performance dating back to 1990, the HFRI Fund Weighted Composite Index is the industry’s most widely used standard benchmark of hedge fund performance globally. The HFR suite of Analysis Products leverages the HFR Database to provide detailed, current, comprehensive and relevant aggregate reference points on all facets of the hedge fund industry. HFR also offers consulting services for clients seeking customized top-level or more nuanced analysis. For the hedge fund industry’s leading investors and hedge fund managers, HFR is The Institutional Standard...Full press release:Source

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