Asian hedge fund capital growth quickens as Abenomics creates opportunity
01 November 2013
News, Asia, Global
By Asia Asset Management
Capital invested in Asian hedge funds surged to its highest level in five years and passed an important growth milestone in the third quarter, according to the latest HFR Asian Hedge Fund Industry Report, released on October 31 by HFR.
Total capital invested in the Asian hedge fund industry increased to US$103.8 billion surpassing the $100 billion milestone for the first time since 2Q08, prior to the global financial crisis (GFC). Performance gains were led by the HFRX Japan Index, which extended record performance gains in 3Q13, while hedge funds in emerging Asia continued to outperform local equity markets. Global hedge fund capital increased by $94 billion to a record of $2.51 trillion in 3Q13.
Investors allocated $1.9 billion of net new capital to Asian hedge funds in 3Q13, marking the fourth consecutive quarter of net inflows and representing a total of $7.3 billion. Inflows in 3Q13 were regionally and strategically concentrated, as Japanese-focused funds experienced inflows of $1.14 billion, while Asian equity hedge funds received inflows of $1.45 billion.
The HFRX Japan Index leads all hedge fund regional exposure indices through the first three quarters of 2013, posting a gain of +23.2% YTD, representing the highest performance since index inception (2004) through the first nine months of a year. Hedge fund gains have not been confined to Japanese-focused funds, as emerging Asia has also produced strong performance gains YTD. The HFRX Asia Equally Weighted Index has gained +11.8% through 3Q13, while the HFRX China Index has advanced +4.3% in 3Q13 and +11% YTD through September, outperforming the decline in Chinese equities by 1500 basis points.
While China (including Hong Kong) has continued its growth as the preferred location for Asian hedge fund strategies, both Singapore and Japan have experienced significant growth in the past year. Over 31% of all Asian-focused funds are headquartered in China, while Singapore and Japan have risen to 12.3% and 4.6%, respectively.
“Abenomics has significantly and fundamentally changed the investment landscape not only for Japan, but for broader Asian, emerging and developed global markets, contributing to record performance gains in Japan and unprecedented opportunities for Asian hedge fund strategies,” stated Kenneth J Heinz, president of HFR. “Expectations for expansion of currency, equity and fixed income volatility, as well as the effects of these active monetary policy measures on trade balances and capital flows have attracted global capital to Asian hedge funds. These capital inflows have occurred as a direct result of the emergence of Asian hedge fund strategies as sophisticated investment vehicles that offer access to dynamic, powerful trends and which mitigate risks created by these ongoing stimulus measures.”
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