Asia Hedge Funds Are Dominating 2017

Led by India- and China-focused managers, the region’s hedge funds are outperforming local equities and the global hedge fund industry.


For the best performing hedge funds, look to Asia.

The region’s hedge funds are besting several local equity indexes, with managers in some countries delivering double-digit returns over the first half of 2017, according to a statement Friday from industry data provider HFR.

India-focused funds led the pack, gaining 26.6 percent over the first six months of the year and outperforming the country’s Sensex 30 index by 1000 basis points. Chinese hedge funds also beat local stock markets, returning 16.2 percent this year through June – more than 1300 basis points higher than Chinese equities.

“For the second consecutive quarter, Asian hedge fund performance was led by exposures to India and China,” HFR president Kenneth Heinz said in the statement. “As investor concerns over the geopolitical tension in North Korea rises and the attention toward currency trade policies increases, funds that strategically position for these events are likely to lead Asian hedge fund industry performance in the second half of 2017.”

Hedge funds have been staging a comeback after years of criticism about poor performance and high fees. During the second quarter, investors put more money into hedge funds than they took out as allocations outweighed redemptions for the first time since the third quarter of 2015, according to HFR.

[II Deep Dive: Investors Are Putting Money in Hedge Funds Again]

Asian hedge funds as a whole – excluding Japanese funds – were up 15 percent in the first half of the year, according to HFR’s emerging markets benchmark. Japan-focused hedge funds gained 6.8 percent over the six-month period, beating the Nikkei 225 by roughly 200 basis points.

Asia-focused hedge funds also far outperformed their peers globally: the $3.1 trillion industry returned less than 5 percent on average over the first half of the year. But with assets under management climbing to $117.1 billion at the end of June, Asia-focused funds represent just a small portion of the industry.

Asia’s hedge-fund industry may benefit from rising interest from Asian-Pacific investors. A Preqin report last week said institutional investors based in the region allocated about $200 billion to hedge funds last year, up from $180 billion in 2015. More than half of this capital came from sovereign wealth funds, with the China Investment Corporation alone accounting for an estimated $30.8 billion.