Indices tracking the performance of hedge funds investing in India and China suggest they had their strongest quarterly performance since the second quarter of 2015, according to Hedge Fund Research (HFR).
The area of emerging Asia benefitted from improving investor expectations for global growth as well as favourable currency movements, HFR suggests in its latest Asian Hedge Fund Industry Report.
For example, the HFRX India Index rose 19.05% through the first quarter this year, its strongest quarter since Q2 2009 – indeed some 780 bps better than the Indian equity market overall as measured by the BSE Sensex 30 Index.
The HFRX China Index gained 10.4%, its best quarterly performance since Q2 2015, also beating the key local equity benchmark, the Shanghai Composite Index, by over 650 basis points.
And the HFRI EM: Asia ex-Japan Index gained 9.07% over the same quarter.
However, HFR also notes that despite the strong returns many investors withdrew money from Asian focused hedge funds, with an overall net outflow of $3.2bn to end the quarter at some $110.43bn. That contrasts with the overall global quarterly increase in hedge fund investments to some $3.066trn – the third quarterly increase in total assets invested.
By strategy, Asian-located Event-Driven and Equity Hedge funds made the strongest gains through the quarter, both up some 6.8%.
Asian-based Macro hedge funds saw negative returns of -0.6%, while Fixed Income Relative Value Arbitrage funds made gains of 0f 0.9%, according to HFR’s index figures.
Kenneth Heinz, president of HFR, said: “India and China led the Asian hedge fund industry in the first quarter, topping global hedge fund industry performance, as well as regional equity markets. The gains are a welcome and stark contrast for investors after experiencing a weak start from these funds in 2016.”
“Geopolitical and economic trends towards increased global economic growth and strength in the US economy are favorable to these strategies, albeit with the continued and ongoing risk of military conflict in the Asian region. It is likely that growth in Asian hedge fund capital increases in coming quarters as investors seek higher performance with increased risk tolerance through sophisticated, specialized Asian hedge fund strategies.”