Hedge Funds Push Into Emerging Markets

Nine out of 10 hedge fund strategies tracked by Preqin posted positive return in April. with the Preqin All-Strategies Hedge Fund benchmark posting a gain of 0.76% in April, its sixth consecutive month of positive performance. All other leading hedge strategies made gains as well, and the 12-month performance for hedge funds now stands at 10.67%. Preqin also reported that Macro strategies funds suffered their second consecutive month of losses, and are up by 0.87% year-to-date. The top performing strategy so far in 2017 is Activist (up 4.9%) followed by Discretionary (up 4.6%).

On a geographic basis, the top-performing hedge funds (greater than $100 million) were in Emerging Markets, which are up 6.6% year-to-date, according to Preqin. This geographic sector has been propelled by three consecutive quarters of new investments, and a strong first-quarter performance of emerging markets hedge funds that helped push this sector in April to an all-time high of $205.8 million assets under management, according to Hedge Fund Research (HRF), Chicago. The top performer for the first quarter was Emerging Markets Asia, which includes India and China. For the period, India returned 5.63%, which contributed to the strongest performance so far this year of 22.1%.

HFR also reported that emerging markets hedge funds overall were up 7.8% based on their index, with China funds posting a gain of 10.3% year-to-date. HFR reported there are about 516 hedge funds investing in the Emerging Markets Asia region. HFR classifies emerging markets are those in Asia (ex-Japan), Africa, Latin America, the Middle East, Russia and Eastern Europe, and Multiple Emerging Markets.

According to Kenneth Heinz, HFR president, emerging markets hedge funds, including those investing in Latin America, the Middle East, Asia, and Russia, have “led industry performance through geopolitical uncertainty.” This uncertainty covered currencies, commodity prices, US dollar strength, politics, and terrorism. He also predicted that emerging market funds will continue to be the top performers throughout 2017.

The strategy laggard on a year-to-date basis has been Macro strategies, with a 0.87% return, based on Preqin data.