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Alternative Market Briefing

Emerging markets hedge funds post steep decline in assets at start of 2016

Friday, February 26, 2016

Komfie Manalo, Opalesque Asia:

Emerging markets hedge funds felt the pain of the market rout in January and posted steep declines in assets due to concerns about slowing growth and weakening currency in China, falling energy prices, and geopolitical risk precipitated a steep drop in risky assets globally.

In its new Asian and Emerging Markets Industry Report, Hedge Fund Research said that the total emerging markets (EM) hedge fund capital declined by $8.5bn in January to $182bn, erasing the FY 2015 asset increase of $7.5bn. The HFRI Emerging Markets Index fell -5.4% last month, following a +2.2% return in 4Q 2015. The index declined -3.2% for full year 2015.

"Extreme dislocations across EM currency, commodity, fixed income and regional equity markets resulted in an acceleration of performance volatility and asset declines in both 4Q15 and early 2016," stated Kenneth J. Heinz, President of HFR. "While geopolitical and economic uncertainty continue to dominate the near-term EM outlook, recent adverse developments have also contributed to a richening of the opportunity set for managers and investors with the risk tolerance to monetize and benefit from these developments."

Steep performance losses across all EM regions contributed to January’s sharp asset decline. The HFRI EM: China Index fell -10.0 % in January, which followed three consecutive months of gains and a 2015 return of +6.......................

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