Emerging market hedge funds see assets rise

Date: Friday, August 26, 2011
Author: Charles Gubert, COO Connect

Capital invested in emerging market-focused hedge funds increased by $1.4 billion during the second quarter of 2011 bringing total assets to a new record of $123 billion, according to data from the Chicago-based Hedge Fund Research.

This is despite emerging market hedge funds having a rather lacklustre year so far with the HFRI Emerging Markets (Total) Index essentially flat at 0.0%.

New capital inflows topped $300 million while performance-based returns hit $1.1 billion. This is the fourth consecutive quarter where there have been positive inflows and overall increases in emerging market hedge fund assets.

Investors are increasingly pursuing emerging markets despite inflationary concerns due to continuing fears over the ongoing European sovereign debt crisis, debate over the US debt ceiling and Standard & Poor’s decision to downgrade the US’s coveted AAA credit rating to AA+.

Emerging market hedge funds represented more than 10% of global hedge fund launches and 16% of all liquidations last quarter.

“As risk aversion has increased through mid-2011, investors are increasingly looking to emerging market hedge funds not only for continued secular economic growth but also for tactical exposure to macroeconomic trends, currency stability and hedged, uncorrelated exposure to developed market equities,” said Kenneth Heinz, president of Hedge Fund Research.

He added these trends were likely to continue going forward.