Research

2017 Key Trends in Latin American Hedge Funds

Introduction

The Eurekahedge Latin American Hedge Fund Index was up 7.10% in April year-to-date underperforming underlying markets as represented by the MSCI Latin American Index which were up 8.03% over the same period. The strength of Latin American hedge fund industry has been well-supported by the recovery of commodity prices during the first four months of the year, with the Ibovespa Index up a modest of 0.65%. Among geographic mandates, globally investing funds topped the table up 11.02% year-to-date followed by Brazil investing funds with 7.41%. Across strategies, long/short equity hedge funds were in the lead with 8.82% gains followed by event driven hedge funds which gains 7.43% over the same period.

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. Despite positive performance-based gains which stood at US$4.4 billion for eight consecutive quarters from Q2 2013 to Q1 2015, investor outflows totalling US$11.5 billion were recorded over this period.

Figure 1a: Industry growth since 2000

  Latin American hedge fund industry growth

The assets under management (AUM) of the Latin American hedge fund industry grew from a modest US$2.5 billion in 2000 to a pre-financial crisis high of US$56.4 billion in 2007. Following the financial crisis, the industry’s AUM declined to US$41.9 billion in 2008 but recovered thereafter as investor interest into emerging markets picked up in the years after reaching a US$60.0 billion high in 2010. The region continued to be under much economic and political duress and suffered from anaemic economic growth as well as a spate of political scandals. The election of Donald Trump as President of the United States did not bode well for Latin American economies with increasing tension into the social and economic ties between U.S and most Latin American economies. However the Trump administration’s decision to renegotiate NAFTA led to a much needed relief for the strained US-Mexico relationship. Despite the strain in Latin America, the Latin American hedge fund industry has remained steady recording performance-based gains and positive net flows in the first four months of the year. Final asset flow figures for April revealed that managers reported performance-based figures totalling US$1.0 billion while recording net inflows totalling US$2.8 billion. As of April 2017, the Latin American hedge fund industry is currently managing US$57.5 billion in assets with a fund population of 371 hedge funds.

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 database@eurekahedge.com to enquire on how to obtain the full research report.

Chat