Asian hedge funds continued their strong performance in the third quarter, with the HFRX China Index gaining 10.5 per cent, according to data released by Hedge Fund Research.

Strong Q3 returns have brought year-to-date performance of the HFRX China Index to 5.5 per cent, outperforming the benchmark Shanghai Composite by nearly 25 per cent.

As a result of the strong performance and indicative of the growing global investor interest in exposure to Asian markets, assets invested in Asian hedge funds increased by nearly USD4bn to USD78bn, inclusive of over USD300m in net new investor inflows.

The Asian hedge fund industry maintains significantly different strategic dynamics from the overall hedge fund industry, recently experiencing increases in activist funds and strategies maintaining high sensitivities to equity markets. 

In the last 12 months, the number of Asian hedge funds which focus on event driven strategies increased to nearly eight per cent of the Asian hedge fund industry; over half of which specialise in activist and distressed strategies.

Nearly two-thirds of capital invested in Asian-focused hedge funds in allocated to equity hedge strategies; this represents a significant contrast to the overall hedge fund industry, of which equity hedge represents less than one third. 

Geographically, new funds continue to locate in China; nearly 25 per cent of all Asian hedge fund firms are now located in China.

“Macro developments in Asian financial markets have become catalysts for global markets, including currency, equity, commodity and inflation exposures,” says Ken Heinz, president of Hedge Fund Research. “Nearly every aspect of the global economy, from trade, energy, financial stability and production is increasingly influenced by Asian economies, and the Asian hedge fund industry has evolved to provide global investors with access to these influential market dynamics.”