News & Events

2018 Overview: Key Trends in Latin American Hedge Funds

Introduction

The Eurekahedge Latin American Hedge Fund Index was up 2.14% as of September 2018 year-to-date, ahead of the MSCI EM Latin America IMI Index which declined 0.19% over the same period. The markets showed optimism on the outcome of the recent Brazilian election, as it entails the economic policy framework for the next four years. Brazil’s economy is currently undergoing an economic recovery from its deep recession between 2014 and 2016, which was caused by declining commodity prices and political concerns. As a result, Brazil was the only geographic mandate in the region that were in the positive territory, gaining 3.70% year-to-date. Roughly 78% of the Brazil-mandated hedge funds in the Eurekahedge database posted gains in September. In spite of the prevailing market uncertainties plaguing the emerging markets caused by weak currencies, trade concerns and political instabilities, Latin American hedge fund managers successfully outperformed other emerging market mandates.

The industry assets of Latin American hedge funds stood at US$64.5 billion as of September 2018, down around US$0.3 billion year-to-date. Industry population continued its streak of decline which has lasted for almost a decade, with seven funds closing down in the third quarter of the year.

Figure 1: Latin American Hedge Fund Industry Growth
 

Onshore funds continued to outperform their offshore peers in 2018, and collectively they manage 60% of the total hedge fund industry assets under management (AUM) of Latin America. Looking at strategic mandates, event driven hedge funds took the lead by gaining 4.63% year-to-date over the first three quarters of the year, while on the other end macro hedge fund lagged behind their peers and returned 0.01% over the same period.

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