Asian hedge funds achieved their strongest performance in 15 years in 2024, leveraging market volatility, winners in China’s uncertain economy, and opportunities in artificial intelligence (AI), according to a report by Reuters.
The HFRI Asia with Japan Index, which tracks hedge funds primarily investing in the region, surged 12.1% last year – the highest annual growth since 2009. HFR, a leading global hedge fund data platform, reported these results amidst a volatile investment landscape marked by capital outflows toward stronger dollar assets, deflation risks in China, and the unwinding of yen-funded carry trades.
While hedge funds skilfully navigated last year’s turbulence, investors predict trading in Asia will remain challenging in 2025, citing geopolitical uncertainties and the implications of Donald Trump’s return to the US presidency.
China-focused funds outperformed benchmark Chinese indexes by selecting winners from the nation’s ongoing economic transformation, according to sources from within the funds and investor circles.
Hong Kong-based Keywise Capital, which manages $2bn, achieved a 51% gain in its flagship Mega Trend strategy. This success was driven by bets on Gen Z consumption trends, including retailer Miniso, and power suppliers like China Yangtze Power, which benefited from increased AI-related demand.
Additionally, Keywise’s tech-oriented Penguin Development Fund delivered a remarkable 71% return.
Fang Zheng, Keywise’s Chief Investment Officer, highlighted AI, youth-driven consumer businesses, and clean energy as key sustainable trends, predicting significant advancements in AI applications for emotional intelligence in 2025.
First Beijing, another China-focused hedge fund, posted a 42% gain last year, supported by investments in Meituan, Atour Lifestyle, and Full Truck Alliance, as per a source familiar with its performance. Funds that capitalised on the window of opportunity following China’s September stimulus package also saw notable returns.
Timothy Moe, Goldman Sachs’ Chief Asia Pacific Equity Strategist, noted that hedge funds adeptly adjusted their positions, scaling up during stimulus rallies and reducing exposure when markets peaked in October.
Fundamental long-short funds in Asia averaged a 14.1% gain, outperforming their counterparts in the US (13.2%) and Europe (4.6%), according to Goldman Sachs Prime Brokerage estimates.
Asia-based multi-strategy funds also fared well, with firms like Dymon Asia, Pinpoint, and Ovata Capital achieving double-digit returns.
Singularity Tech Fund, managed by Hong Kong’s $1.3bn CloudAlpha Capital Management, recorded over a 70% jump, driven by investments in semiconductors and data centre infrastructure.
Similarly, Panview Capital’s flagship pan-Asia fund gained 41%, supported by substantial bets in Japan, according to an investor source.
“We see more interest in either Asian multi-strategy funds or Japanese funds as these are seen as operating in a more predictable regulatory and political environment,” said Patrick Ghali, Managing Partner of Sussex Partners.
