Asian hedge funds make a comeback

DragonPerformance gains and investor allocations have boosted the assets under management of Asian hedge funds, especially those of equity hedge, event-driven and Japan-focused strategies.

Hedge Fund Research data shows the total capital invested in the Asian hedge fund industry has grown to $112.3 billion (€82.5 billion).

Investors allocated $4.2 billion of new capital to the region’s hedge funds in the last quarter of last year, which the data provider says was the highest quarterly inflows since it began tracking the sector in 2008.

Throughout last year, inflows amounted to $10.5 billion, which was also a calendar year record.

Equity hedge and event-driven strategies, which typically exhibit high directional beta to Asian equity and credit markets, were the most sought-after ones.

Macro, including commodity trading advisors, and fixed income based relative value arbitrage experienced smaller inflows.

Strong performance gains further accelerated in the fourth quarter of last year on the back of strong performance in Japan, where the HFRX Japan Index gained 6% and ended the year up at 32.8 percent.

The HFRX China Index gained 7.8%, ending the year with a 19% gain.

Asian capital inflows by region were led by allocations into Japanese-focused hedge funds.

Investors allocated $1.7 billion to pan-Asian, $1.4 billion to Japanese and $1.1 billion to emerging Asia hedge fund strategies.

Kenneth J. Heinz, president of HFR, says 2013 was an “exceptional” year for the Asian hedge fund industry.

The Asian hedge fund industry has now emerged as the preferred mechanism for both global and Asian investors to participate in the exciting growth opportunities while mitigating complex risks associated with quantitative easing, currency devaluation or prospective renminbi appreciation and structural concerns regarding banking institutions, Heinz says.

Despite emerging market-centric currency and equity volatility to begin 2014, Heinz adds, investors are likely to increase allocations to Asian hedge funds as these themes evolve in the first half of 2014.

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