Opalesque Industry Update – Emerging Markets hedge funds posted their strongest start to a calendar year since 2006 with the HFRI Emerging Markets (Total) Index posting an industry-leading gain of +7.3 percent in 1Q12, according to the latest HFR Emerging Markets Industry Report released today by HFR (Hedge Fund Research, Inc), the leading provider of data, indices and analysis of the global hedge fund industry.|
Total capital invested in Emerging Markets hedge funds soared to a record of $127.3 billion (802 billion RMB) to end 1Q12, an increase of nearly $10 billion since year-end 2011, eclipsing the previous AUM record of $123 billion set in 2Q11. This increase in capital was driven by performance-based gains, as net new capital flows from investors remained muted, with funds experiencing inflows totaling $3.1 billion, while those experiencing outflows totaled $3.4 billion, resulting in a modest net outflow of $365 million in 1Q12. New capital flows were concentrated in Emerging Asia and Russia/Eastern Europe, which received $500 million in net new capital combined.
In addition to the strong performance across global emerging markets, hedge funds focused on specific EM regions posted even stronger gains in 1Q. The HFRI EM: Asia ex-Japan Index gained +7.3 percent, its best first quarter return since 2006, outperforming the Shanghai Composite by nearly 300 bps. The HFRX Latin America Index gained +8.4 percent, its best 1Q performance since 1999, mirroring strong gains across Latin American equities. The volatile HFRX Russia Index gained +11.0 percent, mirroring a similar gain from 2010 and the strong performance of Russian equities. The biggest gains in EM hedge funds were from funds investing in India, with the HFRX India Index gaining +18.8 percent during the quarter, outperforming Indian equity markets by 600 bps.
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“Hedge funds investing in Emerging Markets continue to exhibit a resiliency to many of the developed market centric risk factors which continue to dominate investor concerns, posting record gains as developed market economies struggle with outstanding debt, low fixed income yields and weak growth prospects,” stated Kenneth J. Heinz, President of HFR. “In a similar manner to the broader global economy, EM hedge funds will play a crucial role serving as the growth engine in the expansion of the hedge fund industry by offering sophisticated, transparent investment strategies in emerging economies to a growing audience of global investors.”
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HFR (Hedge Fund Research, Inc.) is the global leader in the alternative investment industry, specializing in the indexation and analysis of hedge funds. www.hedgefundresearch.com