Asian Hedge-Fund Assets Rose to $73.7 Billion in Third Quarter

Date: Wednesday, November 4, 2009
Author: Tomoko Yamazaki, Bloomberg.com

Asian hedge-fund assets increased to $73.7 billion in the third quarter, helped by the first net inflow of capital in more than a year, according to a report by Hedge Funds Research Inc.

The increase in assets included $800 million of new capital, the Chicago-based industry research firm said in an e-mailed statement. The performance-based asset increases were concentrated in emerging markets in Asia, with the HFRI Emerging Markets: Asia ex-Japan Index returning almost 9 percent in the three months to Sept. 30, the report showed.

Asian hedge funds are making a comeback this year, beating global peers, as the region leads the world’s emergence from the worst recession since World War II after posting record losses in 2008. A measure tracking the region’s hedge funds has gained about 23 percent this year through October, beating the global index, which has gained 16 percent, according to Eurekahedge Pte.

“Asian hedge funds demonstrated definitive alpha in the third quarter, displaying strategic versatility while building on strong year-to-date performance,” said Ken Heinz, president of Hedge Fund Research in the report. Alpha is the premium an investment portfolio earns above a certain market benchmark such as the Standard & Poor’s 500 Index in the U.S.

“The value proposition for global investors looking to access superior growth characteristics continue to be validated by the tactical flexibility exhibited by the Asian hedge fund industry as it continues to evolve,” Heinz added.

Performance gains were concentrated in funds employing relative value and arbitrage strategies, with those funds’ assets increasing more than $3 billion, the report showed. Relative- value methods take advantage of mismatches in the price of various securities.

The percentage of Asian-focused firms based in China rose about 5 percent to 23.2 percent at the end of the third quarter from a year ago, while 11.7 percent of Asian-focused firms were located in Singapore, according to the report.

Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.

To contact the reporter on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net