Research

2017 Key Trends in Asian Hedge Funds

Introduction

The Asian hedge fund industry has rebounded strongly in 2017, with managers running Asian mandates on track to outperform their global peers – Asia mandated hedge funds are up 9.86% relative to gains of 4.42% posted by the average global hedge fund. Investor appetite for the region has also picked up, with US$5.6 billion of net investor flows during the year as managers recorded US$6.7 billion in performance-based gains. Underlying Asia ex-Japan mandates have posted stellar returns, up 12.48% year-to-date helped by strong performance of underlying Greater China and India focused managers which are up 17.39% and 19.69% respectively for the year. Japanese hedge funds have also posted strong gains, and led on a year-to-date basis among developed market mandates with gains of 5.93%, while their North American and European peers gained 3.30% and 4.36% respectively.

Barring any hawkish comments from the US Fed, or an uptick in geopolitical tensions emanating from the Korean peninsula, a weakened US dollar and ongoing improvements in the Chinese economy are likely to see Asian markets trends higher which should augur well for the region’s hedge fund industry. As of July 2017, total assets under management (AUM) for the Asian hedge fund industry stands at US$180 billion overseen by 1,445 funds.

Among geographic mandates, India-focused funds topped the table with the gains of 19.69% followed by Greater China focused funds which were up 17.39% year-to-date. On the other hand, Asian event driven hedge funds were up 14.03% year-to-date, topping the table among strategic mandates followed by Asian long/short equities gaining 10.90% over the same period.

Figure 1a: Industry growth since 1999

  Asian hedge fund industry map

Figure 1a 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.

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