Sat, Dec 20, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

HFRI Emerging Markets index posts 40%, best gain since 1999, assets post only marginal gains on heightened risk concerns

Wednesday, February 17, 2010
Opalesque Industry Update –Hedge funds investing in Emerging Markets reversed sharp 2008 losses with strong gains in 2009, as the HFRI Emerging Markets (Total) Index gained +40.4 percent for the year, according to data released today by Hedge Fund Research, Inc., the leading provider of data and analysis of the hedge fund industry. This rate of return doubled the overall industry gains as represented by the HFRI Fund Weighted Composite Index, and was led by funds investing in Russia, Latin America, and Emerging Asia.

Assets invested in Emerging Markets hedge funds increased by $25 billion during 2009 to over $93 billion, as performance-based gains of $34.3 billion more than offset total investor withdrawals of $8.5 billion. Withdrawals were significant in the first half of the year, but moderated through mid-year and ended 2009 with a small net inflow of nearly $400 million in the fourth quarter.

Despite the strong gains of 2009, Emerging Markets hedge funds remain well below their previous performance peak (or high watermark) and still require a gain of +14.6 percent from year-end level to fully recover from the drawdown of -39.8 percent which began in 4Q07.

Sovereign risk and service provider updates

Emerging Markets funds ended 2009 with 10 consecutive months of positive performance, only to see this streak broken in January 2010 when these funds experienced a loss of -1.24 percent. Tensions surrounding sovereign credit risk began to mount in 4Q09 and continued through January, contributing to volatility in currencies, commodities and emerging market equities.

Continuing the trend of localization, the number of Emerging Markets funds located in China, Russia, India and Australia increased, while the number in the U.S. and U.K. continued to decline.

The top prime brokers for Emerging Markets hedge funds remain Morgan Stanley and UBS, with both Credit Suisse and Citibank increasing market share. Similarly, top administrators are Citco and HSBC, with Northern Trust and International Fund Services increasing market share.

Region-specific performance and fund growth

• Middle East/North Africa: The HFRX MENA Index posted a gain of +28.3 percent for 2009, its best yearly total since the index was created in 2005. This performance took place despite tremendous local equity market volatility and sovereign credit concerns centered in the UAE in the fourth quarter. Over 20 funds maintain a dedicated focus on investing primarily in theMENA region, managing 2.5 percent of total Emerging Markets hedge fund capital.

• Latin America: Led by strong performance in mining and commodity-sensitive funds, the HFRX Latin America Index returned +41.6 percent in 2009. Over 100 funds globally invest with a dedicated focus on Latin America, and account for $12.3 billion of investor capital.

• Russia/Eastern Europe: Historically the most volatile of the Emerging Markets regions, the HFRI Russia/Eastern Europe Index gained +51.4 percent in 2009. Over 160 funds invest with a dedicated focus on Russia/Eastern Europe, and more than 6 percent of all EM funds are now located in Russia.

• Emerging Asia: The HFRX China Index gained +50.4 percent in 2009, and over 470 funds globally currently invest with a dedicated focus on Emerging Asia. Over half of all Emerging Market hedge fund capital is invested in Emerging Asia, and recent regulatory developments in Chinese financial markets are likely to be a catalyst for continued hedge fund industry growth in the region.

“Developments in sovereign bond markets in recent month have reminded investors of the credit risk and volatility inherent in Emerging Markets, and these risks are likely to persist throughout the rest of the year,” said Ken Heinz, president of Hedge Fund Research, Inc. “Despite this volatility, investors are allocating to Emerging Markets hedge funds expecting these economies to play a significant role in the ongoing global recovery.”


HFR announces Industry Summit: Asia 2010
Hedge Fund Research will host the HFR Industry Summit: Asia 2010 in Hong Kong in September of this year. The HFR Industry Summit is the hedge fund industry’s premier private investor engagement, hosted annually in Chicago and London, and this will mark the event’s inaugural appearance in Asia.


Chicago-based Hedge Fund Research (HFR) Group L.L.C., founded in 1993, is a global leader in the provision of hedge fund data, research, indexation and asset management. www.hedgefundresearch.com


Bg

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - Big hedge funds win again on PetSmart, Riverbed, RBS sells real estate loans to hedge fund Cerberus, Talisman energy speculation: Which hedge funds could benefit?[more]

    Big hedge funds win again on PetSmart, Riverbed From CNBC.com: Another week, another set of wins for activist investors. On Sunday, pet supply retailer PetSmart agreed to the largest leveraged buyout of the year at $8.7 billion. Hedge fund firm JANA Partners had been pushing for a sale a

  2. Outlook - Hedge fund manager who remembers 1998 rout says prepare for pain, Bond guru Bill Gross predicts U.S. economic growth to dip to 2%[more]

    Hedge fund manager who remembers 1998 rout says prepare for pain From Bloomberg.com: Stephen Jen landed in Hong Kong in early January 1997 as Morgan Stanley’s newly minted exchange-rate strategist for Asia. He was soon working around the clock when investors began targeting the region’s

  3. Investing - Hedge funds get boost from healthcare in 2014, Paulson & Co takes stake in Salix on heels of inventory issues[more]

    Hedge funds get boost from healthcare in 2014 From Valuewalk.com: The healthcare sector started the year on a turbulent note, as stocks of many major biotechnology companies were battered. However, most of the players in this sector have bounced back. The BarclayHedge Healthcare & Biotec

  4. Opalesque Exclusive: U.S. legal receivables fund launched in August[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: Investing in asset-backed receivables is a strategy that has been an integral part of the alternative investment space within the overall fixed income asset c

  5. Comment - High fees and low performance hit hedge funds[more]

    From FT.com: Disenchantment over high fees and lackluster performance may finally be turning the tide against hedge funds, fresh data suggest. Despite generally weak returns since the global financial crisis, hedge funds have enjoyed positive net inflows every year since 2010. This helped assets und