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HFRI Asia ex-Japan Index posts strongest month since May 2009

HFRI Asia ex-Japan Index posts strongest month since May 2009


Asian hedge funds gained in March to conclude a volatile Q1 2016, narrowing losses across all Asian regions and strategies from earlier in the quarter. The HFRX Japan Index gained +3.1 per cent in March, leaving it down -1.9 per cent for the year, though topping the Nikkei 225 as the Japanese Yen continued to surge against the US Dollar. 

Total Asian hedge fund capital declined to USD111.9 billion (JPY11.98 trillion, CNY727.5 billion) the lowest level since Q3 2013, according to the latest HFR Asian Hedge Fund Industry Report. Total hedge fund capital globally declined to USD2.85 trillion (JPY305.1 trillion Japanese Yen, 18.53 trillion Chinese Renminbi), as reported in the HFR Global Hedge Fund Industry Report, released last month.

The HFRI China Index surged in March, adding +6.1 percent, narrowing the 2016 decline to -5.9 percent, while topping the Shanghai Composite by over 900 basis points. Similarly, the HFRI India Index gained +11.8 per cent in March, the strongest monthly performance since January 2012 and third highest since Index inception, also narrowing the 2016 decline to -6.0 percent. The HFRI Asia ex-Japan Index rose +6.9 per cent in March, the strongest monthly gain since May 2009, when the Index was up +10.3 percent.

Asian hedge funds executing Macro hedge fund strategies, which invest long and short across currency, commodity, fixed income and equity markets using both quantitative and fundamental strategies, led performance with a +3.0 per cent return in Q1. The HFRI Macro (Total) Index, incorporating all Macro hedge funds globally, including quant/CTA strategies, was up +1.5 per cent in Q1 2016. Asian Event-Driven strategies, including Activist and Distressed hedge funds, surged in March, gaining +6.0 per cent. The HFRI Event-Driven (Total) Index returned +3.3 per cent for the month, while the HFRI ED: Activist Index advanced +5.8 per cent.

Total Asian hedge fund capital has declined in two of the last three quarters since peaking at USD126.3 billion (JPY13.5 trillion Japanese Yen, 821.2 billion Chinese Renminbi) in Q2 2015. The Q1 2016 decline included investor outflows of USD2.3 billion, the largest net outflow since Q1 2009.

“Surging Japanese Yen volatility has contributed to gains across Asian hedge funds, as many funds recovered from intra-quarter declines, despite continued weakness in Japanese equities, resulting from recent Yen strength,” says Kenneth J Heinz (pictured), President of HFR. “Asian Macro strategies have continued to lead global industry performance through recent energy and currency macroeconomic volatility. Persistently low or negative interest rates, competitive currency valuations and an uneven global recovery suggest the potential for continued dislocations, possibly positive or negative. Hedge funds positioned for this environment are likely to drive industry performance through mid-2016.”

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