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Chinese equity surge drives Asian hedge fund assets to record level

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Hedge funds investing in China surged to a record monthly gain in April, as trading volume on the Shanghai-Hong Kong Stock Connect program soared and the Chinese Central Bank reduced interest rates.

The HFRI China Index was up +13.0 per cent in April, the strongest monthly gain since Index inception in 2008.

Total global capital invested in the Asian hedge fund industry surpassed the milestone of USD120 billion (USD120.75 billion, RMB750 billon, JPY14.5 trillion) to begin Q2 2015, as the number of Asian hedge funds approached 1,200, according to the latest HFR Asian Hedge Fund Industry Report, released today by HFR. Total capital invested in the hedge fund industry increased to a record USD2.95 trillion to begin Q2 2015.

The HFRI EM: Asia ex-Japan Index returned +10.5 per cent in April, the strongest gain since the Index gained +11.3 per cent in December 1999. Through the first four months of 2015, the HFRI China Index and HFRI EM: Asia ex-Japan Index have climbed +18.8 and +14.5 per cent, respectively, following more muted gains from 2014.

Inflows into Asian hedge funds through the end of 1Q15 totalled USD1.1 billion USD, the tenth consecutive quarter of inflows, with capital moving into Emerging and Pan-Asian funds only partially offset by outflows from Japanese-focused funds. Asian hedge fund inflows were also concentrated in Equity Hedge strategies, with these receiving inflows of USD1.44 billion, partially offset by outflows across other strategies. Total hedge fund capital invested in Emerging Asia increased to USD52.5 billion (RMB325 billion), while capital invested in Pan-Asian hedge fund strategies increased to USD39 billion (242 billion RMB). Total Asian hedge fund capital invested in Japan declined slightly to USD29.2 billion (JPY3.5 trillion). The HFRI Japan Index advanced +5.0 per cent in April and has gained +7.8 per cent YTD 2015, following a gain of +3.5 per cent in 2014.

“Recent developments with Chinese equity markets, including performance and trading volume, are both exciting and historic in magnitude, with significant involvement and participation from Asian-focused hedge funds attracting capital and interest from global investors,” says Kenneth J Heinz, President of HFR. “As exciting as the environment has been, it is likely that the Asian hedge fund industry is only now at the beginning of a capital growth cycle, as global investors position for continuation and extension of these gains, while seeking to use sophisticated strategies to protect their portfolios from the volatility inherent in these markets.”

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