Sat, Jan 21, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Emerging markets hedge funds navigate sovereign crisis gaining 4.7% through April - HFR

Thursday, May 20, 2010
Opalesque Industry Update - Emerging Markets (EM) hedge funds gained +4.7 percent YTD through April, suggesting that many EM managers have strategically navigated through much of the still-unfolding EU-centric sovereign debt crisis, according to Hedge Fund Research (HFR), the leading provider of hedge fund industry data. In addition to the significant weakness in the sovereign credit market, funds also encountered volatility in currency, commodity and underlying equity markets, with this volatility accelerating through 2Q10.

Risk-conscious investors repositioned capital in 1Q10, paring investments in Emerging Asia while adding to exposure in Latin America and Multi-EM as total capital invested in EM hedge funds increased to $98 Billion. Strong first quarter performance resulted in a $5.3 Billion increase in EM AUM, which easily offset a small investor net capital outflow of $560 million; this marked the sixth quarter out of the last seven in which investors withdrew capital from EM hedge funds. Some geographic rotation was evident in the most recent data, as redemptions from Asia (ex-Japan) and Russia/Eastern Europe-focused funds exceeded $1 billion combined, while investors added over $500 million to Latin America and funds investing in Multiple Emerging Markets.

Hedge fund managers used a variety of tools to generate gains through the first four months of the year, including not only tactical exposure adjustment but effective use of protection from credit default swaps (CDS) and various currency hedging techniques. While sovereign weakness is presently concentrated in EU countries, many EM managers began to deal with an escalation of EM sovereign credit risk over six months ago (when risk was focused in the Middle East) by using CDS protection to insulate their portfolios from these losses and produce gains if the sovereign credit risks increased.

Additional findings from HFR include:

  • Middle East/North Africa: The HFRX MENA Index posted a gain of +7.9 percent in 1Q10, including a record gain of +9.3 percent in March, the highest monthly gain since index inception in 2005. Despite recent increases volatility in GCC sovereign credit, total MENA-focused capital has been steady and reflects a ten-fold increase since 2003.
  • Russia/Eastern Europe: Since the Rouble devaluation and Russian sovereign debt restructuring in 1998, funds investing in Russia have gained an annualized +23.5 percent, the top performance region for the hedge fund industry. Despite annualized volatility exceeding 22 percent, capital invested in Russia/Eastern Europe now represents over 35 percent of all EM hedge funds.
  • Latin America: Investors allocated new capital to funds investing in Latin America while paring exposure to other regions, suggesting that investors expect Latin America to be insulated from the existing sovereign credit crisis. Over 8 percent of EM funds are located in Latin America, fourth most geographically after US, UK and China.
  • Emerging Asia: Investors pared exposure to hedge funds investing in Emerging Asia, withdrawing over $850M in 1Q10, despite these funds significantly outperforming Chinese equity markets for the period. The HFRX China Index declined by -0.75 percent in 1Q10, a period in which Chinese equity markets fell by over five percent.
“Throughout the ongoing EU-centric sovereign debt crisis, Emerging Markets hedge funds have continued to demonstrate strategic sophistication and performance resilience,” said Kenneth Heinz, President of Hedge Fund Research, Inc. “These qualities are likely to solidify and enhance the appeal of EM hedge funds to global investors in the current environment.”

HFR coming to Asia, announces Industry Summit: Asia 2010

Hedge Fund Research has also announced that it will host its HFR Industry Summit: Asia 2010 in Hong Kong on September 16th & 17th at The Four Seasons Hong Kong. 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. Corporate website: www.hedgefundresearch.com

- FG

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 - This hedge fund made 37% betting on banks in 2016 and remains bullish after the Trump rally, Hedge fund legend David Einhorn is making a big bet on GM, After impressive 85% return in 2016, hedge fund looks to Canadian gold producer, small banks[more]

    This hedge fund made 37% betting on banks in 2016 and remains bullish after the Trump rally From Forbes.com: Can bank stocks continue to rise after a 28% surge in the KBW Bank Index in 2016, fueled by a post-election rally as stock pickers returned to the beaten down sector? Forget the s

  2. SWFs - China sovereign wealth fund CIC plans more U.S. investments[more]

    From Reuters.com: China Investment Corporation (CIC), the country's sovereign wealth fund, is looking to raise alternative investments in the United States due to low returns in public markets, its chairman said on Monday. CIC will boost its investments in private equity and hedge funds as wel

  3. Some hedge funds strong start in 2017 nice contrast to 2016[more]

    With the 2016 HSBC Hedge Weekly performance rankings in the books - a year in which the same leader-board entries pretty much dominated unchallenged throughout the year - comes a new leader board that is a hard-scrabble mix of hedge fund styles and categories. What is clear after but a few short wee

  4. Macro hedge funds and CTAs outperform in December on strong dollar[more]

    Komfie Manalo, Opalesque Asia: The last month of 2016 saw risk assets climbing higher, as part of expectations that the new U.S. administration will remove barriers to growth and investment, Lyxor Asset Management said. December also saw the Fed hik

  5. Opalesque Exclusive: Roxbury credit events UCITS gathers more assets[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: The Roxbury Credit Events Fund, launched in September 2015, was up 4.24% in 2016, having returned seven positive months during the year. The managers raised