The Asian hedge fund industry resumed strong capital growth in Q4 to conclude 2014 at a record level of capital, as Asian equity markets posted sharp advances heading into the new year.
Total capital managed by the Asian hedge fund industry stood at USD119.75 billion (¥ 14.26 trillion; RMB 748 billion) at year-end, including an increase of USD2.3 billion for Q4 2014, according to the latest HFR Asian Hedge Fund Industry Report, released today by HFR, the established global leader in the indexation, analysis and research of the global hedge fund industry. For the full year, the Asian hedge fund industry posted an increase in capital of USD7.4 billion on global inflows of USD3.8 billion, this compared to a capital increase of USD24 billion on USD10.5 billion inflow in 2013.
Asian hedge fund performance was led by the volatile HFRI EM: India Index, which gained +5.4 per cent for 4Q14 and an impressive +44.4 per cent for 2014, leading all regional indices globally. The gain for the HFRI EM: India Index was the second highest since inception (’09: +56.2%) and topped Indian equities by over 1,400 basis points.
The HFRI EM: China Index also posted a strong increase of +4.6 per cent in 4Q, completing a gain of +5.7 per cent for 2014, which trailed strong gains of Chinese equities in both 4Q and FY14. The HFRX Japan Index gained +5.2 per cent for 2014, narrowly trailing the gain of Japanese equities.
Investor capital inflows in Asian hedge funds for both 4Q and 2014 were led by Equity Hedge strategies, which received inflows of USD1.2 billion in 4Q and USD2.1 billion for FY 2014. However, Event Driven hedge funds located in Asia, which execute in Distressed and Shareholder Activist strategies, led the performance by strategy with these posting a gain of +11.5 per cent for 2014, topping the muted gain of one per cent for the HFRI Event Driven Index.
Asian-located Macro hedge funds, which actively invest across currency, commodity, fixed income and equity markets returned +5.5 per cent for 2014, in line with full year gain for the HFRI Macro Index. Capital flows by region in 4Q were led by Japanese focused funds, with inflows of USD960 million; for FY 2014, Asian inflows were led by funds focused on Emerging Asia, with inflows of USD3.45 billion for 2014.
“Asian hedge funds were well-positioned for the global currency and commodity markets dislocations of the past few months, while at the same time, Asian hedge funds have also been the beneficiaries of a strong relative performance and positive decoupling of regional equity markets, both of which have contributed to Asian hedge fund gains in recent months,” says Kenneth J Heinz, President of HFR. “As the composition of the Asian hedge fund industry continues its powerful evolution toward that of the global industry, hedge funds are increasingly using innovative strategies to access opportunities created by increased financial market globalisation and integration. Asian hedge funds executing on these sophisticated strategies are likely to drive strong and continued expansion of the Asian hedge fund industry in 2015.”