Key Trends in Latin American Hedge Funds (September 2021)

The Eurekahedge Latin American Hedge Fund Index was up 2.10% as of July 2021 year-to-date, narrowly underperforming the MSCI EM Latin America Index, which gained 2.60% over the same period. The slow vaccination rollout in the Latin American region has necessitated the imposition of lockdowns in a bid to slow down the spread of the highly infectious COVID-19 virus, negatively impacting the economic recovery in the region. Most Latin American countries have struggled to secure sufficient vaccine doses due to logistical challenges that has impeded the vaccine rollout. The emergence of the Lambda variant in the region has led to worries that the pandemic could worsen, especially since studies have revealed that the Lambda variant confers significant resistance to neutralising antibodies induced by the inactivated CoronaVac vaccine, one of the major vaccines used in Latin America. As such, GDP levels in the region is expected to return to pre-pandemic levels only by the end of 2022, translating into three years’ worth of lost economic growth.

The industry assets of Latin American hedge funds stood at US$62.6 billion as of July 2021, up around US$2.3 billion year-to-date. Industry population increased slightly from 347 funds in 2019 to 369 funds in 2021, reversing a trend of decline that has lasted for almost a decade.

Figure 1: Latin American hedge fund industry growth

Onshore funds continued to outperform their offshore peers in 2021, and collectively managed more than 70% of the total hedge fund industry AUM of Latin America. Looking across strategic mandates, long short equities hedge funds lead their strategic peers by posting a 2.39% return over the first seven months of 2021. On the other end of the spectrum, distressed debt hedge funds lagged behind their strategic peers with a 2021 July year-to-date return of 0.55%.

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