EM Hedge Fund Assets at Record High: Increasing Crypto Trading

Hedge fund assets under management increased to a record $237.7 billion as at Q2 2021, according to data from Hedge Fund Research (HFR). This represents an increase of almost $9 billion over Q1 and $17 billion since the end of 2020.

Total capital invested in Asian hedge funds increased to a new record of $138.5 billion to end Q2 21, representing an increase of $5.9 billion over the prior quarter and $12.6 billion since year end 2020.

Strong gains in the sector helped drive the growth, HFR says, with funds investing in India, Russia, China and the Middle East leading the way. The HFRI Emerging Markets (Total) Index has returned 8.1% year-to-date through July, led by the HFRI Emerging Markets: India Index, which surged 33.3%, while the HFRI Emerging Markets: Russia/Eastern Europe Index vaulted 16.3%.

The latest HFR reports on Asia and emerging markets generally also indicate that Hedge funds across EM regions including Korea, Russia, China, and the Middle East (as well as Japan) have become increasingly active in cryptocurrency trading. Despite recent volatility, the HFR Cryptocurrency Index is up 174% year-to-date through July, though paring gains in recent months as many currencies fell sharply from record highs.

“Emerging Markets hedge funds performance and capital extended to 2021 surge as the global economy reopening progressed through mid-year, albeit with complications from new virus variants,” says Kenneth Heinz, president of HFR. “Inflationary pressures remain present across both EM and developed markets, with EM hedge fund performance topping the performance of most respective EM regions.

“Once again, hedge funds across both EM and Japan have continued to increased exposure to cryptocurrencies, mirroring expansion of consumer adoption and usage of cryptocurrencies in EM regions,” he continues. “Leading global institutions and investors extended their increases exposures to EM and Cryptocurrency hedge funds, positioning for continuation of powerful and favourable EM and cryptocurrency trends through 2H21.”