As investors return to emerging markets, hedge funds
targeting these economies have surged to record highs.
Capital managed by emerging market hedge funds rose to an
all-time high for the fourth consecutive quarter at the end of
June, increasing to $213.3 billion, according to hedge fund
data firm HFR.
This latest uptick in assets under management came as
investors committed more money to emerging markets hedge funds
than they took out for the first time since 2015.
Inflows returned to emerging market hedge funds after
eight quarters of outflows as investor risk tolerance
increased, driven by outstanding performance and regional
equity market outperformance concentrated in emerging
Asia, said Kenneth Heinz, president of HFR, in a company
During the second quarter of 2017, emerging market hedge
funds received $800 million in net new inflows, according to
HFR. Overall, emerging market funds grew by $7.5 billion,
driven largely by positive performance as emerging markets,
especially China and India, improve.
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The inflows to emerging market hedge funds reflect rising
interest in emerging markets more broadly. According to a
recent report from eVestment, institutional
assets under management in both active and passive long-only
emerging markets strategies have also hit all-time highs.
Active long-only assets under management totaled $767.2
billion as of June 2017, while passive strategies grew to
Heinz said that ongoing equity and currency market
adjustments, including a recent surge in Chinas currency,
the Renminbi, were likely to contribute to increased
opportunities for emerging market managers going
So far, managers focused on China and India have led 2017
emerging market hedge fund performance, according to HFR. The
firms India hedge fund index increased 3.6 percent in
July, for a year-to-date return of roughly 25 percent.
Meanwhile, HFRs China hedge funds index earned 3.5
percent in July and 19.3 percent year-to-date. In total, hedge
fund capital invested in emerging Asia-focused hedge funds
increased to $52.5 billion.