Global financial markets have been peppered with a series of events adding to volatile conditions in the trading environment. Within Asia, monetary stimulus continues to be a main theme as global events weigh in on investor sentiment. The fallout from Brexit; though largely contained for the moment, and the US Federal Reserve’s unconfident march towards policy normalisation will be much watched for as 2016 draws to a close.
Indeed with regional and global developments in the background, the Asian hedge fund industry had a difficult start to the year. The industry’s assets under management (AUM) declined by US$0.7 billion in the first seven months of 2016, the lowest year-to-date decline on record since 2010. Over the past seven months, the pace of investor allocations were slow and net inflows stood at a modest US$0.5 billion. Investor redemptions have picked up pace over the past couple of months, with managers witnessing three consecutive months of outflows totalling US$2.6 billion in the period ending July. Performance-based figures were also hard to come by for Asian managers, who posted losses of US$1.2 billion over the same period. The Asian hedge fund industry recorded modest growth in asset base in 2016, bring the industry’s total AUM to US$170.7 billion, overseen by 1,430 funds.
Among geographic mandates, India-focused funds topped the table, up 6.49% year-to-date. On the other hand, performance for Greater China focused hedge funds languished over the same period, declining 4.55% year-to-date. Asian relative value hedge funds were up 6.61% year-to-date, topping the table among strategic mandates while performance was lacklustre for Asian event driven hedge funds, which declined 2.32% over the same period.
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 (AUM) 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.
The full article is available in The Eurekahedge Report accessible to paying subscribers only.
Subscribers may continue to login as usual to download the full report and non-subscribers may email firstname.lastname@example.org to enquire on how to obtain the full research report.