Research

Overview of 2009 Key Trends in Asian Hedge Funds

Introduction

The Asian hedge fund sector grew at an exponential pace through the first eight years of the last decade before witnessing heavy redemptions in 2008 and early-2009 along with significant losses due to the financial downturn. The size of the region’s hedge fund industry peaked in December 2007, reaching US$176 billion; however, the combined effect of withdrawals and performance-based losses brought the assets under management down to US$105 billion in April 2009. Since then, however, the sector has undergone a remarkable turnaround in the last five months of 2009, attracting significant amounts of capital as well as posting record performances – the Eurekahedge Asia ex-Japan Hedge Fund Index was up 37% in 2009 – bringing the size up to US$117.4 billion dollars as at end-December 2009.

Figure 1 shows the growth in the number of hedge funds and the assets under management in Asian hedge funds since 2000.

Figure 1: Growth of the Asian Hedge Fund Industry

Click on the image for an enlarged preview

Asian hedge funds entered 2009 on a rather sombre note. Massive withdrawals flowing over from 2008 resulted in a sharp decline in assets during the first four months of the year, which also translated into greater performance-based losses due to forced selling and liquidating positions. Assets under management in Asian hedge funds declined by US$26 billion in the first half of the year due to net negative asset flows – a decline of 15%.

However, with a turnaround in the markets post-March, regional managers delivered some remarkable returns which served to...

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