Research

2014 Overview: Key Trends in Asian Hedge Funds

Introduction

The Asian hedge fund industry has kept up a steady pace of growth and returns comparable to that seen over the same period last year, with modest February year-to-date gains of 1.64%. Total assets under management (AUM) increased by US$3.5 billion largely supported by performance-based gains, bringing the total size of the Asian hedge fund industry to US$164.2 billion managed by a population of 1,382 hedge funds.

As at end-1999, the size of the industry stood at US$14 billion, growing to US$176 billion over the next eight years by end-2007 – a period which saw strong growth in the hedge fund industry’s tilt towards Asia. By 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 20.48% 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. Upward trajectory in the industry continued in 2010, realising strong performance-based growth as the Eurekahedge Asian Hedge Fund Index gained 9.17% during the year.

Figure 1a: Industry growth since 1999
 

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. While 2012 saw Asian managers post a mild recovery in terms of performance, net asset flows were in the red with the industry losing US$4.4 billion through redemptions.

Figure 1b: Contribution of performance and investor allocation to industry growth
 

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