Russia and India hedge funds beat the S&P 500 return in the second quarter (Q2), though most emerging market hedge funds failed to despite positive gains.
Russia hedge funds posted a 13.8% return, India 23.48% and Russia/Eastern Europe hedge funds 7.08%, compared to a 5.22% return for the S&P index, which includes dividends re-invested.
HFR, which benchmarks investment performance, says emerging market hedge funds posted strong gains through mid-year, increasing total emerging market hedge fund assets to an eighth consecutive quarterly record, despite a sovereign debt default by Argentina and continuing geopolitical uncertainty in Ukraine, Syria, Israel, Iran and Iraq.
Hedge funds investing in other emerging markets, such as Asia, China, and Latin America, did not beat the S&P but did all post positive returns and – with the exception of the Middle East – either beat their Q1 positive returns, or reversed losses.
Year-to-date returns against the S&P have been mixed, with only the HFRI Russia/Eastern Europe index posting a loss – though much less than the Russian Trading System Index (5.22% versus 15.48%).
Total hedge fund capital invested in HFR emerging market indices increased to over $184 billion (€134 billion) at the end of Q2, according to the latest HFR Emerging Markets Hedge Fund Industry Report.
The total number of emerging market hedge funds increased to over 1,150, a new record.
Kenneth J. Heinz, president of HFR, says: "Despite recent gains for broad market indices in both emerging and developed markets, multiple geopolitical catalysts for market volatility remain salient to global investors, including fluid situations in Syria, Iran, Iraq, Israel, and Ukraine/Russia."
He says emerging market hedge funds are likely to drive continued record assets in the second half.
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