Global hedge fund investors allocated over USD1.4 billion in net new capital to Asian hedge funds in Q3 2011 as global financial markets responded to developments in the European sovereign debt crisis and weakening economic growth prospects across developed economies, according to the latest edition of the Asian Hedge Fund Industry Report by HFR.
The third quarter inflow represents the sixth consecutive quarterly net inflow from investors into Asian hedge funds and the eighth quarter in the last nine quarters that Asian funds have seen positive flows. As a result of performance based asset declines, total assets under management (AUM) in Asian hedge funds declined to USD82.6 billion, the first quarterly decline in over a year.
Asian hedge funds performance posted declines for the quarter, though in most cases Asian hedge fund performance significantly outperformed Asian equity indices, which experienced significant losses and volatility late in Q3. The HFRX China Index posted a decline of 3.4 per cent for Q3 and 5.4 through the first three quarters of 2011; in contrast, the Shanghai Composite Index declined over 14.5 per cent for the quarter and nearly 16.0 per cent over the first three quarters of 2011.
Inflows were concentrated in Equity Hedge strategies and pan-Asian exposure, with these funds experiencing inflows of over USD1 billion and nearly USD1.6 billion, respectively. Asian Macro funds and funds focusing exclusively on Emerging Asia experienced modest outflows for the quarter. Through the first three quarters of 2011, investors have allocated USD7.6 billion in net inflows to Asian hedge funds, which represents approximately 10 per cent of the USD70.7 billion in net inflows committed to the global hedge fund industry over this period.
“In what proved to be challenging quarter for global financial markets, investors affirmed their ongoing and forward looking commitment to Asian hedge funds,” says Kenneth J Heinz (pictured), President of HFR. “With continued volatility associated with European sovereign debt and weakening global economic growth, Asian hedge funds represent a crucial area of growth potential for investors. Asian financial markets and institutions have become powerful drivers of global macro trends in currency and commodity markets and Asian hedge funds offer global investors specialised local market expertise and tactical exposure to these powerful trends.”