Emerging markets hedge funds see inflows of new capital approaching $1 billion in second quarter

Emerging markets hedge funds see inflows of new capital approaching $1 billion in second quarter
 
Total assets remain virtually unchanged; performance through 2Q is down across nearly every region, with the exception of Latin America
 
Investors allocated approximately $995 million to hedge funds investing in Global Emerging Markets in the second quarter of 2008, an increase of more than 60 percent from the first quarter inflow of $597 million, according to Hedge Fund Research (HFR), a leading hedge fund industry data provider. 
            On a year-over-year basis, total inflows were down by 72 percent compared to 2Q 2007, which saw approximately $3.7 billion in assets added to the category.  If the current pace of inflows continues for the rest of the year, it would represent the lowest total capital inflow since 2000, when Emerging Markets funds experienced a net outflow of capital.
Total capital invested in Global Emerging Markets hedge funds increased slightly to over $111 billion, as the HFRI Emerging Markets (Total) Index gained 0.37 percent for 2Q, slightly narrowing the losses for the first half of the year, which approached seven percent through the end of June. Asset flow trends in Emerging Markets mirror broader trends in the overall hedge fund industry, which has seen first half flows decline to $29 billion following a record inflow nearly $200 billion in all of 2007.
The number of funds investing in Emerging Markets remained relatively unchanged, with 1,061 at the end of 2Q versus 1,057 at the end of the first quarter. Just over 50 percent of these funds are located in the U.S. or U.K.; however, reflecting a trend toward increasingly locating funds in the markets where they are investing, the second quarter saw increases in the number of funds located in Brazil, Singapore, Hong Kong and the United Arab Emirates.
            Other findings from the report include:
 An increase in the percentage of Emerging Markets funds focusing on Macro Strategies, and fewer funds focused on more directional Equity Hedge strategies.
  YTD performance losses across nearly every region, with the notable exception of the HFRI Emerging Markets: Latin America Index, which was up more than three percent for the year at the end of the second quarter.
 Positive 2Q and 12-month returns for all Emerging Markets regional indices except the HFRI Asia (ex-Japan) Index. Emerging Asia funds have declined more than 5.4 percent in the last twelve months. Over the past five years, they have seen annualized returns of 19 percent.
 
“While overall flows have slowed, investors continued to allocate assets to Emerging Markets hedge funds in the second quarter, indicating a continued belief in the long-term growth prospects for these developing economies,” said Kenneth J. Heinz, president of Hedge Fund Research, Inc.