Global Emerging Markets funds gain nearly 19 percent for the quarter;
total assets in Emerging Markets increase by $10 billion
Hedge funds investing in Emerging Markets far outpaced average performance in the broad hedge fund universe in 2Q 09, according to data released today by Hedge Fund Research (HFR), the leading source for hedge fund industry data.
The HFRI Emerging Markets (Total) Index gained 18.92 percent for the quarter compared to a gain of 9.17 percent for the HFRI Fund Weighted Composite Index, HFR’s broad-based gauge of industry performance. Through the first six months of the year, Emerging Markets funds returned 20.18 percent, the best first-half for Emerging Markets strategies since a 27.4 percent gain in 1H 99.
The 2009 Emerging Markets performance follows the historic decline of 37.26 percent for the HFRI Emerging Markets (Total) Index in 2008, the worst year of performance on record for Emerging Markets since HFR began tracking the category in 1990.
2Q Performance Offsets Continued Withdrawals
In spite of stellar performance, investors continued to withdraw assets from Emerging Markets during the quarter, with $2.5 billion in capital exiting the regions during the period. This was more than offset by positive market returns totaling $12.9 billion, resulting in a net increase of $10.4 billion in Emerging Markets assets in 2Q. Assets in hedge funds focusing on Emerging Markets now stand at $77 billion.
Since 1990, Emerging Markets Outpace Developed Markets, Broad-Based Index
While unquestionably volatile, Emerging Markets hedge funds have represented one of the most attractive segments of the hedge fund industry when viewed over longer periods of time and through market cycles, according to the HFR data. Since 1990, the category has achieved annualized gains of 13.6 percent, almost 160 basis points better than the average broad-based hedge fund gain of 12 percent.
Additional findings from the HFR Data include:
Middle East/North Africa (MENA): While still the smallest Emerging Market region in terms of dedicated capital, hedge funds focusing exclusively on MENA have seen a 10-fold increase in AUM over the last five years. There are currently more than 20 hedge funds that invest exclusively in this rapidly growing region, and the HFRX MENA Index has gained 16.9 percent through the first half of 2009.
Latin America: After posting the smallest loss in 2008 among all the Emerging Markets regions, the HFRI Emerging Markets: Latin America Index gained 21.6 percent in the first half. More than 100 funds invest exclusively in Latin America, representing nearly 10 percent of all Emerging Markets funds.
Russia/Eastern Europe: The HFRX Russia Index gained 25.3 percent in 2Q 09, making it the strongest region in terms of quarterly performance. Funds investing in Russia/Eastern Europe manage greater than 20 percent of all Emerging Market hedge fund capital.
Emerging Asia: More than 465 funds currently invest in Emerging Asia, representing almost half of all Emerging Markets funds. After sharp losses in 2008, the HFRX China Index has gained 43.1 percent YTD through July.
“The hedge fund industry has continued to evolve through the current period of consolidation, and in no place is this evolution more apparent than in funds investing in Emerging Markets,” said Kenneth Heinz, president of Hedge Fund Research. “Emerging Markets hedge funds are now larger, more sophisticated, more strategically diverse, more structurally transparent and better positioned to offer global investors access to dynamic growth opportunities around the world.”
