Research

2016 Key Trends in Latin American Hedge Funds

Introduction

The US$54.9 billion Latin American hedge fund industry grew by US$0.6 billion over the past nine months. Though a modest figure, this represents the industry’s first year-to-date asset expansion since 2013. Much of this year’s asset expansion is attributed to positive performance-based figures totalling US$1.4 billion while investors redeemed US$0.8 billion from the industry. The Eurekahedge Latin American Hedge Fund Index was up 17.23% for the year with underlying long/short equity managers leading much of this strength, gaining 20.22% over the same period. The performance of underlying emerging market assets have been well-supported by the recovery in oil and commodity prices during the second and third quarter of the year, with the Ibovespa Index gaining 34.64% over the past nine months.

Figure 1a: Industry growth over the years

  North American hedge fund industry growth 2000 to August 2016

 

The assets under management (AUM) of the Latin American hedge fund industry was a modest US$2.5 billion in 2000, before the industry reached its peak at US$56.4 billion in 2007. While not spared from the global financial crisis, the industry benefitted from renewed investor interest into emerging economies after the crisis. Asset base for the Latin American industry peaked at a high of US$60.3 billion in 2013 with much of the gain in assets attributed to performance-based figures. However, business confidence in the region dipped on the back of political scandals and declining oil and commodity prices. Unnerved investors stepped up on redemptions with outflows totalling US$11.5 billion recorded between Q2 2013 and Q1 2015. Over the past year, AUM for the Latin American hedge fund industry contracted by US$2.2 billion – the second consecutive annual contraction for the industry. Though still three months shy of year-end, this trend seem to have reversed at least for September year-to-date figures with asset base recording a US$0.6 billion expansion.

Figure 1b: Asset flows since January 2011

  North American hedge fund industry growth 2000 to August 2016

 

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