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Japan funds navigate volatility as equities plunge in Q2

Friday, August 10, 2012
Opalesque Industry Update: Hedge funds investing in Japan/Developed Asian markets quickly shifted to defensive positioning in 2Q12, protecting investor capital as Japanese equities plunged over 10 percent in 2Q12, according to the latest HFR Asian Hedge Fund Industry Report, released today by HFR, the global leader in the indexation and analysis of the global hedge fund industry.

The HFRX Japan Index posted a narrow decline of -1.5 percent in 2Q, a sharp reversal from 1Q gains of +5.2 percent. Hedge funds investing in China experienced declines similar to that of Japan in 2Q, with the HFRX China Index falling -1.6 percent, while the HFRX Asia with Japan Index declined -2.4 percent. Hedge funds investing in other Emerging Asian economies fell more sharply, as the HFRX India Index and HFRX Korea Index declined by -8.4 and -10.8 percent, respectively, in 2Q12. These losses followed 1Q gains of +19.2 percent for the HFRX India Index and +6.3 percent for the HFRX Korea Index.

Investors allocated a modest $88 Million in net new capital to Asian focused hedge funds in 2Q, with flows concentrated in Japan focused funds. Despite the inflow, total capital invested in the Asian hedge fund industry declined by $3.3 Billion, bringing total capital dedicated to the region to $83.3 Billion (6.55 Trillion Japanese Yen; 542 Billion Chinese renimbi).

The number of Asian focused hedge funds increased to 1,117, with these representing nearly 15 percent of total global hedge funds. In addition, HFR’s most recent data shows the rate of new hedge fund launches and liquidations specific to the Asian hedge fund industry continues to exhibit more favorable dynamics than the global hedge fund industry as a whole. Finally, the trend toward Asian focused funds operating their headquarters locally also continued, with China, Japan and Australia all experiencing an increase in the percent of Asian hedge funds in these countries.

HFR launches 3 new HFRX Indices

HFR is pleased to launch the following new HFRX Indices, expanding the family of HFRX Indices to 76. Consistent with many of the current HFRX Indices, each of the following includes daily performance transparency. For more information, please visit

  • HFRX Emerging Markets Composite Index includes multiple hedge fund strategies with geographic exposure to one or more Emerging Markets regions and combination of asset classes with emphasis on global macroeconomic, political or specific secular market growth trends.
  • HFRX Fixed Income - Credit Index includes strategies with exposure to credit across a broad continuum of credit sub-strategies. The investment thesis across all strategies is predicated on realization of a valuation discrepancy between the related credit instruments.
  • HFRX MLP Index includes Master Limited Partnership strategies which are typically exchange listed partnerships that engage in certain businesses, mostly pertaining to the transportation, extraction and storage of certain commodities and natural resources including, but not limited to, oil, natural gas and coal.

“Asian hedge funds were subjected to tremendous volatility and a sharp reversal of 1Q gains in 2Q12, with Japanese and Chinese funds navigating these changes with tactical flexibility and positive contributions from Quantitative Macro, Event Driven and Fixed-Income based Relative Value Arbitrage strategies,” said Kenneth J. Heinz, President of HFR. “The Asian hedge fund industry is rapidly developing in sophistication, breadth, depth and global reach with funds implementing dynamic commodity and currency-based strategies across local regions, including mainland China. These innovative Asian hedge funds are likely to provide global performance leadership and attract capital from US, European and Emerging Markets investors seeking new growth opportunities in coming quarters.”


Press Release


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