Some EM Hedge Funds are Doing Well: HFR
Posted by Colin Lambert. Last updated: December 16, 2021
Strong gains in emerging markets hedge funds focused on India, Russia, and the Middle East were the standout performers, according to hedge fund research and analysis firm HFR.
The HFRI Emerging Markets (Total) Index has returned +5.6% year-to-date 2021 through November, led by the HFRI Emerging Markets: India Index, which has vaulted 35.0 %, while the HFRI Emerging Markets: Russia/Eastern Europe Index surged 22.7%.
Total Emerging Markets hedge fund assets increased to a record of $275.5 billion to end 3Q21, representing an increase of $1.8 billion over the prior quarter and $18.9 billion since year end 2020, HFR says.
While EM hedge fund performance was led by India and Russia, other EM regions posted mixed performance. The HFRI MENA Index advanced 15.8% through November, while the HFRI EM: China Index posted a narrow gain of 0.14%. The HFRI EM: Latin America Index fell 8.0%, as both inflationary and supply chain pressures continued to build.
Hedge funds across EM regions including Korea, Russia, China, and the Middle East (as well as Japan) have become increasingly active in volatile cryptocurrency trading, HFR observes. Despite recent volatility, the HFR Cryptocurrency Index has surged 300 % year-t0-date, unsurprisingly leading overall industry performance gains.
Total capital invested in Asian hedge funds increased to a new record of $139.4 billion to end 3Q21, representing an increase of nearly $1.0 billion over the prior quarter and $13.5 billion since year-end 2020.
“Powerful inflationary pressures and global supply chain constraints have emerged as dominant trends into year-end, complicating an uncertain global recovery environment and increasing geopolitical risks in Eastern Europe,” says Kenneth Heinz, president of HFR. “Emerging markets hedge funds have effectively navigated this complex and fluid environment, with specialised focus on EM currency volatility (i.e., Turkey), spiking global inflation, the rapid expansion of cryptocurrency trading, and shifts in energy trading relationships including refining and Nord Stream 2 pipeline implications.
“Leading global institutions and investors looking to access powerful trends in EM and Cryptocurrency hedge funds while limiting volatility associated with these rapidly growing areas, are likely to drive continued growth and expansion through 1H22,” he adds.