Kenneth J. Heinz Opalesque Industry Update -
HFRX China Index tops Shanghai Composite despite quarterly decline;
Sixth consecutive quarter of inflows to Asian hedge funds
Global hedge fund investors allocated over $1.4 billion in net new capital to Asian hedge funds in 3Q11 as global financial markets responded to developments in the European sovereign debt crisis and weakening economic growth prospects across developed economies, according to the latest edition of the Asian Hedge Fund Industry Report, released today by HFR, the global leader in the indexation, analysis and database management of the alternative investment industry.
The third quarter inflow represents the sixth consecutive quarterly net inflow from investors into Asian hedge funds and the eighth quarter in the last nine quarters that Asian funds have seen positive flows. As a result of performance based asset declines, total assets under management (AUM) in Asian hedge funds declined to $82.6 billion, the first quarterly decline in over a year.
Asian hedge funds performance posted declines for the quarter, though in most cases Asian hedge fund performance significantly outperformed Asian equity indices, which experienced significant losses and volatility late in 3Q. The HFRX China Index posted a decline of -3.4 percent for 3Q and -5.4 through the first three quarters of 2011; in contrast, the Shanghai Composite Index declined over -14.5 percent for the quarter and nearly -16.0 percent over the first three quarters of 2011.
Inflows were concentrated in Equity Hedge strategies and pan-Asian exposure, with these funds experiencing inflows of over $1 billion and nearly $1.6 billion, respectively. Asian Macro funds and funds focusing exclusively on Emerging Asia experienced modest outflows for the quarter. Through the first three quarters of 2011, investors have allocated $7.6 billion in net inflows to Asian hedge funds, which represents approximately 10 percent of the $70.7 billion in net inflows committed to the global hedge fund industry over this period.
“In what proved to be challenging quarter for global financial markets, investors affirmed their ongoing and forward looking commitment to Asian hedge funds,” said Kenneth J. Heinz, President of HFR. “With continued volatility associated with European sovereign debt and weakening global economic growth, Asian hedge funds represent a crucial area of growth potential for investors. Asian financial markets and institutions have become powerful drivers of global macro trends in currency and commodity markets and Asian hedge funds offer global investors specialized local market expertise and tactical exposure to these powerful trends.”
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