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Hedge Fund activity in Asia-Pacific region slows in Q1

Wednesday, April 20, 2016
Opalesque Industry Update - The latest Preqin research finds that having made gains of 7.54% in 2015, Asia-Pacific-focused hedge funds recorded losses of 2.02% through the opening quarter of the year, the lowest performance of any region. While the hedge fund industry as a whole saw returns of -0.43% in the quarter, monthly returns for Asia-Pacific funds were the most volatile of any region, as Preqin’s benchmark ranged from -4.19% in January to 4.13% in March. Europe-focused funds also struggled in Q1 2016, recording losses of 1.97%, while North America-focused funds posted -0.64% for the period as a whole.

The proportion of hedge fund launches in Q1 that were based in Asia-Pacific halved from the level seen in Q4, as the region accounted for just 5% of all launches globally. North America-based managers represented 64% of launches in the quarter, with Europe accounting for just over a quarter (27%). Additionally, just 5% of new hedge fund launches were focused on the Asia-Pacific region, down 12 percentage points from Q4 2015. The appetite of Asia-Pacific-based investors for hedge funds has significantly decreased from 36% of fund searches in the final quarter of 2015 to just 11% of fund searches in Q1 2016.

Other Key Q1 Hedge Fund Facts:

  • Launches by Strategy: Funds pursuing equity strategies accounted for 47% of all launches in Q1, down from 54% the previous quarter. Macro strategies represented 9% of total launches, more than doubling from 4% of launches in Q4. Macro funds also posted the best returns of any strategy in Q1, at 1.13%.

  • Returns by Structure: CTAs delivered net returns of 1.33% in Q1, the highest of any structure, while hedge funds recorded the lowest of all structures at -0.43%. Funds of hedge funds and UCITS hedge funds saw losses of 2.44% and 1.61%, respectively.

  • Largest Fund Managers: Three-quarters of the top 20 biggest hedge fund managers are based in the US with the largest, Bridgewater Associates, holding $152bn in assets under management as of the end of 2015. The three largest fund of hedge fund managers are also all based in the US, holding a combined $132bn in AUM.

  • Searches by Strategy: Just under half (48%) of all investor searches were for long/short equity strategies in Q1. Event driven strategies accounted for 14% of investor searches, a drop of 8 percentage points from Q4, with most other strategies remaining stable from Q4.

Comment:

“The Asia-Pacific region saw activity slow in the first quarter of 2016, recording net losses and seeing a reduction in the number of launches focused and based in the area. While returns for all regions were negative in the first quarter of the year, the volatility of Asia-Pacific-focused funds, coupled with the sharp decrease in launch activity, indicates that fund managers are finding challenges within the region.

However, given the strong performance seen in the region over the past four years and the return to form in March, investors and fund managers focusing on the region can be optimistic for a future increase in activity in the future. March’s revival is widespread across different regions and fund managers will be seeking to build on this throughout the rest of 2016.”

Amy Bensted – Head of Hedge Fund Products, Preqin

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