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Kenneth J Heinz, President of HFR.

China emerges as Asian HF capital

Hedge funds investing in Emerging Asia posted industry-leading gains to start 2012, with the HFRI EM: Asia ex-Japan Index gaining 7.4 per cent in 1Q12, the best start for the index since 2006 when it gained 12.3 per cent, according to data released today by HFR.

The HFR index of Emerging Asia hedge funds easily outperformed Chinese equity markets by over 450 basis points for 1Q; recent gains follow a volatile 2011 which saw the HFRI Asia Index decline by -18.08 per cent. In contrast, while the HFRX Japan Index gained 5.2 per cent for 1Q12, it trailed the strong quarterly gain of +19.2 per cent for the Nikkei 225.
The number of active Asia-focused hedge funds increased to 1,101, approaching the record number of 1,107 Asia-focused hedge funds set in 4Q07. Total capital invested in the Asian hedge fund industry increased by over USD4.5 billion since YE 2011 to USD86.6 billion (RMB544 billion; JPY6.9 trillion Japanese Yen) to end 1Q12. Asia-focused funds experienced a modest net capital of investor outflow for the quarter of USD256 million (0.29 per cent of capital); the sum of all funds which experienced net inflows totalled USD1.39 billion, while funds experiencing net redemptions totalled USD1.64 billion.
China has continued to emerge as the preferred location for hedge fund firms investing in Asia, with 30 per cent headquartered in China, a significant increase since 1Q09 when 20% were China-based. Globally, China trails only the US, UK and Switzerland as the preferred location for hedge funds worldwide, ahead of both Canada and France by number of hedge funds. In the Asian region, Singapore is the second-most preferred location for Asian-focused funds, with nearly 10 per cent of funds located there, followed by Australia and Japan, respectively.
“It is difficult to overstate how important the ability for investors to access Asian markets and investors as an integral component of the growth of the global hedge fund industry in coming years,” says Kenneth J Heinz (pictured), President of HFR. “China will continue to emerge as the capital of the Asian hedge fund industry, representing integral access to specialised local expertise and insight of Asian markets as sophisticated hedge fund strategies evolve to operate in these markets. As this occurs, funds operating in Hong Kong, Shanghai and Singapore will be as relevant and significant to investors as those operating in New York, London and Zurich.”

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