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2014 Key Trends in Asian Hedge Funds

Introduction

The Asian hedge fund industry struggled to duplicate their previous year’s outstanding performance amid a more volatile market environment, gaining only 0.31% but outperforming underlying regional markets1 by over 2% as at May 2014 year-to-date. Total assets under management (AUM) increased by US$5.2 billion during the same period, largely supported by fresh investor inflows, bringing the total size of the Asia hedge fund industry to US$152.8 billion managed by a population of 1,357 hedge funds2.

The size of the industry stood at US$14 billion as at end-1999, and increased over the next eight years to US$176 billion by end-2007 – a period which saw a strong growth in the hedge fund industry’s tilt towards Asia. As at end-2007, the total fund population in the region stood at 1,237 funds up from 145 funds in 1999. Gains realised over this period were partially reversed by the advent of the global financial crisis which saw the Eurekahedge Asia Hedge Fund Index decline by 20.27% in 2008, ushering in a spate of fund liquidations as managers struggled to deal with negative returns and redemption requests from investors. The industry bottomed out in April 2009 with AUM declining to a low of US$104.8 billion before witnessing a rebound of sorts amid rallying equity markets and some positive asset flows in the second half of 2009. The industry continued its upward trajectory in 2010, realising strong performance-based growth as the Eurekahedge Asian Hedge Fund Index gained 9.05% during the year.

Figure 1: Industry growth since 1999
 

As illustrated, in 2011 the industry shed some of its earlier gains as the Eurozone sovereign debt crisis dominated market sentiment resulting in US$6.4 billion worth of performance-based losses for fund managers in the second half of the year alone.

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Footnote

1 Represented by the MSCI AC Asia Pacific IMI Index (Local) (as at  April 2014)

2 As of May 2014 estimates (as at  April 2014)