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Emerging market hedge fund capital hits record level

Rio de JaneioroThe total capital invested in emerging market hedge funds reached a record level at the start of the year, as commodities recovered and the dollar posted strong gains.

The assets held in emerging market funds increased to $200.7 billion (€190.5 billion) at the end of the fourth quarter of 2016, the second consecutive quarterly record according to hedge fund research and index firm HFR.

For year-end 2016, emerging market hedge funds assets increased by $9.3 billion in spite of investor outflows of $4.8 billion.

The record capital raising was led by funds investing in Latin America and Russia. HFR’s Latin America index has continued its run of good form into this year, posting gains of 5.6% in January.

In 2016, Latin America topped the league of hedge fund performance with an overall gain of 27.2%. Total capital invested in Latin American-focused hedge funds increased to $6.3 billion in 2016, managed by over 100 funds.

Hedge funds focused on Russia and Eastern Europe also look set to continue their good form into this year, with gains of 3.2% last month. By the end of 2016, funds focused on this region gained 26.8%.

Emerging market Asia hedge funds only narrowly kept in the black last year, posting gains of just 0.05%. But this year there are more positive signs as Asia ex-Japan funds gained 3.7% in January, outperforming the Shanghai Composite Index which returned 1.8%.

Kenneth Heinz, president of HFR, said funds that can navigate the divergent monetary policies in US and Europe on emerging markets should continue to do well this year.

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