Asian hedge funds enjoy capital boost during second quarter

Date: Thursday, August 5, 2010
Author: Charles Gubert, Hedge Funds Review

Investors allocated over $360 million in new capital to Asian hedge funds in the second quarter of 2010 reversing the net asset outflow in the first quarter, according to Hedge Fund Research.

Total capital invested in Asian-focused funds declined to $74.4 billion as performance-based losses offset the impact of the new capital.

Investors were encouraged by a more relaxed foreign exchange policy in China as well as steps taken by the Chinese central bank to increase the flexibility of its currency policy.

Event driven strategies which focused on distressed, shareholder activist, merger arbitrage and other special situations received the majority of new investor capital.

Equity hedge and macro funds also attracted capital.

Investors shifted assets from dedicated emerging Asia funds into funds focused on Japan and broadly across Pan-Asia.

Asian funds generally mirrored the broader hedge fund industry, although there were some divergences, according to the report.

Asian equity hedge funds experienced an increase of $1.7 billion due to a strong second quarter performance in 2010. This was in contrast to equity hedge funds globally, which suffered a performance-based decline of $23 billion during the period.

Asian-focused relative value arbitrage funds lost $2.6 billion due to performance in comparison to these funds globally, which experienced increases of $1.1 billion.

"Access to capital, banking stability, limitations on foreign investment into China, utilisation of listed futures contracts on the Chinese equity market and the prospect of modification to foreign exchange rate policy are some of the most central themes, not only to the Asian hedge fund industry growth, but to the global macro framework of investing across asset classes in coming years," said Kenneth Heinz, president of Hedge Fund Research.