Capital invested in Asian hedge funds continued to fall in the fourth quarter of 2008, declining nearly USD16bn to just over USD71bn and extending the trend of losses and withdrawals th
Capital invested in Asian hedge funds continued to fall in the fourth quarter of 2008, declining nearly USD16bn to just over USD71bn and extending the trend of losses and withdrawals that characterised most of 2008, according to a report by Hedge Fund Research.
Assets invested in Asian-focused hedge funds peaked at USD111bn at the end of 2007, six months before total industry assets peaked in mid-2008 at USD1.93trn, according to HFR’s calculations.
While assets dropped both globally and in Asian hedge funds in the second half of 2008, the decline in Asia has been slightly more pronounced, with assets invested in the region declining by 28.9 per cent while total industry assets fell by 27.1 per cent.
Hedge funds investing in both developed and emerging Asia experienced sharp performance losses in 2008, with the HFRI Emerging Markets Asia (ex-Japan) Index falling 33.4 per cent, while the HFRX Japan Index declined by 12.2 per cent.
The broad-based HFRI Fund Weighted Composite Index, which measures performance for the global hedge fund industry, declined 18.6 per cent last year.
For the full year, performance-based asset declines in Asian funds exceeded the assets withdrawn by investors, but in the fourth quarter investor redemptions of USD8.6bn exceeded the performance-based asset decline of USD7bn.
HFR also says that despite a moderation of performance losses in developed Asia, the distribution of assets has shifted away from Japan in last year. Capital dedicated to investing in Japan declined by nearly five per cent relative to other Asian regions.
Despite last year’s losses, hedge funds investing in emerging Asia have produced an annualised gain exceeding eight per cent over the past three years, significantly outperforming global hedge fund and equity market benchmarks over the same period.
Excluding the US and UK, China and Singapore are the preferred locations for Asian hedge fund managers, representing 36 and 20 per cent of assets respectively. Goldman Sachs and Morgan Stanley remain the largest prime brokers to Asian funds.
‘Despite full year performance losses for 2008, Asian hedge funds posted gains in December and some Asian equity markets have posted strong gains to begin 2009,’ says HFR president Kenneth J. Heinz. ‘As investors perceive opportunities and risk tolerance recedes from extreme levels, we expect again to see leadership and growth from the Asian hedge fund industry.’
