Hedge fund capital invested in Emerging Markets (EM) rose to a record level to begin Q4 2017, with the primary contribution coming from the industry-leading performance of Chinese hedge funds.
Total EM hedge fund capital increased to USD223 billion (RMB1.48 trillion, BRL730 billion, NIR14.5 trillion, RUB13.2 trillion, and SAR834 billion), according to the latest HFR Emerging Markets Hedge Fund Industry Report. As previously reported by HFR, total hedge fund capital globally increased to a record of USD3.15 trillion to begin Q4 2017.
Chinese hedge funds have led EM hedge fund performance for 2017, with the HFRI EM: China Index surging 28.1 per cent through October, the best performance since 2009, and topping the gain of Chinese equities by over 1700 basis points YTD. Total hedge fund capital invested in Emerging Asia increased by 13.5 per cent to USD55.2 billion through the first three quarters of the year, while total EM hedge fund capital increased by 10.9 per cent; the HFRI Emerging Markets (Total) Index has climbed 15.6 per cent through October.
Hedge funds investing in Latin America also posted strong performance gains YTD, with the HFRI EM: Latin America Index advancing +15.5 per cent, following a surge of 27.2 per cent in 2016. Total EM hedge fund capital invested in Latin America has increased 7.7 per cent in 2017 to USD6.8 billion. Similarly, the HFRI EM: Russia/Eastern Europe Index has added 8.2 per cent YTD, following a jump of 27.0 per cent in 2016. Total EM hedge fund capital invested in Russia/Eastern Europe has increased 4.4 per cent in 2017 to USD30.6 billion.
The HFRI EM: MENA Index fell 1.2 per cent in Q3 2017 and 1.85 per cent in October, paring the YTD return to +4.7 per cent. The Index has seen declines of 3.8 and 7.1 per cent, respectively, in each of the prior two calendar years. Total EM hedge fund capital invested in MENA increased by 6.7 per cent YTD to USD4.9 billion.
“Emerging Markets hedge funds extended a strong 2017 into the fourth quarter, as accelerating global trade, restrained inflationary pressures and moderating geopolitical tensions drove gains across regional EM equity markets,” says Kenneth J Heinz (pictured), President of HFR. “Chinese hedge funds have continued to demonstrate strong outperformance of regional equities through security selection and exposure adjustment, while MENA focused funds continue to navigate regional volatility associated with unpredictable political and commodity adjustments. EM hedge fund performance and growth leadership is likely to extend into 2018 as these trends continue.”
