Where Were the Best-Performing Hedge Funds in 2013?

(January 21, 2014) — Asian hedge funds outperformed their global peers last year and investors took notice, chalking up the highest inflows to the region since 2007, research has shown.

Overall, hedge funds based in Asia (but outside Japan) made 15.85% in 2013, data monitor Eurekahedge said in its end of year report. This outstripped performance by funds based in the larger hubs of North America and Europe.

Investors allocated $11 billion to these funds, the report showed— the largest amount for six years—while the funds realised performance-based gains of $8.1 billion, bringing the size of the industry to $131.1 billion.

Funds allocating to emerging markets in Asia witnessed strong asset flows in 2013 after seeing mostly negative asset flows over the last five years. Between January 2008 and December 2012 Asia ex-Japan funds witnessed US$32 billion in net negative asset flows.

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“Consistent performance of the regional managers coupled with a resurgent risk appetite among investors this year has resulted in greater allocations to the region”, Eurekahedge said.

Investors were impressed with hedge funds across the board, data monitor Preqin reported last month. The firm said that in 2013, the proportion of investors who felt their return expectations had not been met fell to its lowest level since data monitor Preqin began recording data. This was in noticeable contrast to the two preceding years when dissatisfaction was widespread amongst institutional investors, Preqin said.

Alongside Asia-based funds, North American funds also found favour with investors, the Eurekahedge report said.

By the end of the year, total assets under management of the North American hedge fund industry stood at $1.35 trillion, the highest level on record, with net asset flows and performance-based gains for the year standing at $58.3 billion and $66.7 billion respectively.

“Given the consistent performance of North American hedge funds over the years we anticipate further asset flows to North American hedge funds in 2014 as the size of the industry is expected to grow to $1.5 trillion over the next two years,” Eurekahedge said. “Investors in the region are increasingly keen to allocate to hedge funds due to the strong performance and downturn protection that the managers have historically provided, especially over the last few years.”

The Eurekahedge North American Hedge Fund Index had an annualised return of 10.60% with a low annualised standard deviation of 5.51%. Additionally, as would befit the largest hedge fund hub, the sector provided the greatest variety of strategies and the largest number of funds for investors to choose from.

European managers also had a good 2013. They witnessed net positive flows throughout the year, raising their assets by nearly $60.2 billion. Total assets in European hedge funds stood at $449.9 billion, bringing them closer to their historical high of $473 billion, reached in December 2007.

Equity long/short strategies were the only ones to see constant inflows throughout the year, with a net $82.2 billion allocated worldwide. These managers also saw performance-based gains raise their assets under management by $48.3 billion.

Hedge Funds: Winning Hearts and Assets in 2013 & Hedge Funds Stepping onto Mainstream Managers’ Turf

(January 21, 2014) — The CIO of the China Investment Corporation (CIC) is following in the steps of his predecessor to become vice chairman of the country’s largest asset pool.

Li Keping is to take over the role when Gao Xiqing the fund’s current vice chairman and president retires this year, Bloomberg has reported, citing sources close to the CIC.

This move would be the second time Li has followed Gao into a role. In 2011, he took over the CIO role that Gao had held since inception in 2007.

Before joining the CIC, Li had been vice-chairman of China’s smaller asset pool, the National Social Security Fund (NSSF)—and CIO since 2001.

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When Li joined CIC, Ashby Monk at the University of Oxford’s Sovereign Wealth Fund Project said in a blog that the move was a good one.

“Much of his time at the NSSF was spent building the fund from the ground up (his appointment began only a year after the fund was established in 2000),” Monk said. “So, Li is rightly seen as the key architect of the NSSF’s increasingly sophisticated investment strategy. It’s clear (at least to me) that the CIC is getting a solid CIO with a long investment track record. And, if you’ll permit a bit of provocation, it’s probably about time, as the other key executives at the CIC — while brilliant and accomplished — aren’t investors.”

Last year, Lou Jiwei said he had been privileged to serve as the founding CIC Chairman of the alongside its “dedicated staff” and his departure in July paved the way for a new internal structure at the fund.

He presented a six-item agenda, ranging from consolidating research and investment teams to enhancing allocations and investment competence, as well as launching analytical systems to improve monitoring and oversight. Some 36.2% of the CIC’s assets was managed internally at the end of 2012 by a global investment staff of 443, and its international portfolio made a 10.6% return.