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India and LatAm hedge funds lead YTD industry gains

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Emerging Markets hedge funds extended gains through mid-2023 with India and Latin America funds leading the way against a backdrop of persistently high inflation and the possibility of a US recession, according to the latest performance data from HFR.

The HFRI EM: India Index surged +18.7% YTD through August, while the HFRI EM: Latin America Index jumped +14.5% YTD, as highlighted in the the HFR Asian Hedge Fund Industry Report and the HFR Emerging Markets Hedge Fund Industry Report.

Despite the military conflict following the Russian invasion of Ukraine continuing through its second year, hedge funds investing in Eastern Europe and Russia have also surged in recent months on the back of unprecedented uncertainty and volatility, with the HFRI EM: Russia/Eastern Europe Index vaulting +20.6% from June through August. After declining -15.6% in the first five months of the year, the Index is now back into positive territory with a +1.9% YTD return through August, following a steep performance decline of -40.3% in 2022.

The HFRI Emerging Markets (Total) Index, which covers all EM regions, advanced +5.2% YTD through August. The investable HFRI 500 Fund Weighted Composite Index meanwhile, which consists of funds investing in both Emerging and Developed markets, gained +2.5% YTD through August, led by the HFRI 500 Equity Hedge Index, which is up +4.2% for the year so far.
Total Emerging Markets and Asian hedge fund assets rose through mid-2023, with Emerging Markets increasing to estimated $246.9bn, while total capital invested in Asian hedge funds rose to $127.2bn to begin Q3 2023.

In addition to India and Latin America, other Regional Emerging Markets indices also posted gains to begin 2023, with the HFRI EM: MENA Index gaining +3.9% YTD through August, while the volatile HFRI EM: China Index declined -1.4% YTD through August, after falling -19.3% in 2022. The HFRI Japan Index meanwhile, posted a strong gain of +7.7% YTD through August as the Japanese Yen declined sharply against the US Dollar.

Hedge funds with high exposure to cryptocurrency across EM regions including Korea, Russia, China, the Middle East, as well as Japan have surged so far in 2023, with the volatile HFR Cryptocurrency Index putting on +17.9% YTD through August, after plunging by -54.0% in 2022.

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