Global hedge fund investors eye Asia Pacific and EM exposures

03 March 2017   Category: News, Asia, Global   By Asia Asset Management

In a new Credit Suisse survey, global hedge fund investors were found to have increased their interest in gaining emerging market (EM) exposure, with a particular focus on Asia Pacific and India.

Asia Pacific drew the greatest interest at 24% of net demand, slightly lower than last year’s 28% but still topping the 2017 list, according to the annual survey titled Shifting Tides, which polled 320 institutional investors from around the globe with hedge fund allocations totalling over US$1.3 trillion.

Following closely behind was EMs with a net demand of 22%; which was a substantial gain from the 11% reported in 2016. India came in third with 19%.

Developed Europe dropped to fifth place from its top position last year, with net demand declining to 13% from 36%. “This is likely a reflection of investors’ views on current valuations across global markets”, the report read.

“When looking at investment opportunities on a global basis, investors once again favoured the broader Asia-Pacific region this year, with emerging markets close behind”, Robert M. Leonard, global head of Credit Suisse Capital Services wrote in the report. “While interest in hedge funds incorporating a global strategy remained strong, some regions, such as developed Europe, did experience a significant downtick in interest levels from last year”.

The latest HFR Emerging Markets Hedge Fund Industry Report revealed that assets dedicated to EM hedge funds increased to $200.7 billion as of the end of 2016. Total hedge fund assets saw an increase of $121.6 billion in 2016, ending the year at $3.02 trillion, added the report.

“Expectations for trade and immigration policy adjustment accelerated at the start of 2017, as hedge fund capital invested in EM set a second consecutive quarterly record and surpassed the $200 billion milestone for the first time”, Kenneth J. Heinz, president of HFR, said in the report.

“Strong performance gains, specifically focussed on Latin America and Russia/Eastern Europe, contributed to this growth, as investors positioned for the impacts of divergent monetary policies in US and Europe", he added. “Specialised hedge funds which have demonstrated the ability to navigate these trends are likely to continue to lead industry gains in the first half of 2017".