Asian hedge funds extended Q1 gains through mid-year, led by funds investing in India and China, resulting in the first quarterly asset inflows since 2Q15, and increasing Asian hedge fund capital to the highest level since Q4 2015.
The HFRX India Index gained 6.4 per cent in Q2 17, bringing YTD performance to +26.6 per cent, topping the Sensex 30 Index by over 1000 basis points for H1 2017. Total capital invested in Asian hedge funds rose to USD117.1 billion (RMB787 billion, JPY12.95 trillion, NIR7.45 trillion), a quarterly increase of USD6.7 billion, according to the latest HFR Asian Hedge Fund Industry Report. New net capital inflows totalled USD1 billion.
Chinese hedge funds also extended gains despite growing global geopolitical tensions on the Korean peninsula, with the HFRX China Index climbing 5.2 per cent in 2Q17 and 16.2 per cent for H1 2017. This topped the muted gain of Chinese equities in H1 2017 by more than 1300 basis points. Total capital invested in China-focused hedge funds increased to USD52.5 billion through mid-year, a YTD increase of USD3.9 billion. Similarly, the HFRI EM: Asia ex-Japan Index gained 15.0 per cent in H1 2017, which, alongside contributions from funds investing in Middle East, Russia/Eastern Europe and Latin America, drove HFRI Emerging Markets (Total) Index performance to +9.6 per cent in H1 2017.
Hedge funds focused on Japan were also up through H1 2017 as the Japanese Yen climbed against the US Dollar, with the HFRI Japan Index advancing 3.0 per cent in Q2 2017, bringing H1 2017 gain to +6.8 per cent. This topped the performance of the Nikkei 225 by approximately 200 basis points. Total capital managed by hedge funds focused on Japan rose to USD28.6 billion through mid-year.
Asian-located hedge funds investing in Equity Hedge (EH) and Event-Driven (ED) strategies led performance through mid-year, with Asian-located EH funds returning 12.2 per cent in H1 2017, while Asian-located ED funds gained 10.5 per cent. The HFRI Equity Hedge (Total) Index was up 5.9 per cent in H1 2017, while the HFRI Event-Driven (Total) Index climbed 4.1 per cent.
“For the second consecutive quarter, Asian hedge fund performance was led by exposures to India and China, as allocations outpaced redemptions to Asian-focused funds for the first time in eight quarters,” says Kenneth J Heinz (pictured), President of HFR. “As investor concerns over the geopolitical tension in North Korea rises and the attention towards currency trade policies increases, funds that strategically position for these events are likely to lead Asian hedge fund industry performance in the second half of 2017.”
