Japan powers hedge fund returns

weightlifterNet inflows to Asian hedge funds outpaced flows to both US and European strategies in the second quarter and boosted the asset class's investment level to the highest since 2007.

Investors allocated over $3 billion (€2.3 billion) of new capital to hedge funds that focus on Asian markets, according to the latest HFR Asian Hedge Fund Industry Report.

Japan equity strategies performed the best on the back of strong Japanese equity returns, while hedge fund managers focused on China managed to avoid steep declines in Chinese equities.

Capital invested in the Asian hedge fund industry at the end of the second quarter was more than $98.4 billion.

Flows during the quarter were concentrated in equity hedge strategies and Japan-focused funds. The equity hedge strategy attracted $2.2 billion in allocations and benefited also from $1.2 billion in performance-based gains.

Japan equity strategies received over $1.7 billion and, by the end of second quarter, the sector was at its highest level - $24.8 billion – since the second quarter of 2008.

Japan led Asian hedge fund performance. The HFRX Japan Index gained 6.3% in the second quarter and year-to-date performance through June was 18.7%.

The HFRX China Index posted a narrow decline of 0.46% for the second quarter, reducing the year-to-date gain for the index to 6.4%.

Hedge fund data provider HFR says that China-focused hedge funds successfully avoided steep equity market declines associated with slowing economic growth and concerns about banking risks, outperforming the 12.8% decline in the Shanghai Composite Index by over 1900 basis points year to date.

HFR also reports that total global hedge fund industry capital increased by nearly $40 billion to a record $2.41 trillion.

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