Research

2015 Overview: Key Trends in Asian Hedge Funds

Introduction

Market calamity took Asian hedge funds on a rough ride in 2015, and despite facing financial storms, Asian hedge funds have recorded positive assets under management (AUM) growth in the last quarter of 2015 with the industry’s total asset base growing by US$9.5 billion as of November 2015 year-to-date, bringing the total size of the industry to reach US$171 billion, managed by 1,423 hedge funds.

In terms of sector allocations, exposure into financials, healthcare, IT and consumer discretionary sectors have contributed to good performance for managers. Within single-country mandates, Australia/New Zealand hedge funds and Greater China focused hedge funds have generally performed well year-to-date despite a tumultuous year for both economies.

Figure 1a below shows the industry growth of Asian hedge funds since 1999. In the pre-financial crisis era, the Asian hedge fund industry saw the steepest climb over the next eight years, starting from 1999. Assets under management stood at US$14 billion as at end-1999 and reached US$176 billion by end-2007. Fund population also grew in tandem over the same period of time, from 145 funds in 1999 to reach 1,237 funds as at end-2007. However, gains realised over this period were partially reversed by the global financial crisis, resulting in a spate of fund liquidations as managers struggled to deal with negative returns and strong redemptions from investors. April 2009 saw AUM declining to a US$104.8 billion low before the industry witnessed a rebound on the back of rallying equity markets and positive asset flows in the second half of 2009.

Figure 1a: Industry growth over the years
 

Asian managers were also affected by the 2011 Eurozone debt crisis with the Asian hedge fund industry seeing their asset base contract by US$4.8 billion during the year as market uncertainty gripped the global economy. While performance figures improved in 2012 with gains of US$7.0 billion, asset base saw a modest growth of US$2.7 billion as gains were erased by strong redemption pressure from investors.

 

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