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Russia, MENA, and India-focused hedge funds accelerate as inflation spikes

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Strong gains in Emerging Markets (EM) hedge funds focused on India, Russia, and the Middle East continued to lead through Q3, navigating macroeconomic challenges of inflationary pressures, global supply chain constraints, and the emergence of the Omicron coronavirus variant, with performance topping EM regional equity markets and again being complemented by volatile cryptocurrencies.

The HFRI Emerging Markets (Total) Index has returned +5.6 per  cent YTD 2021 through November, led by the HFRI Emerging Markets: India Index, which has vaulted +35.0 percent YTD, while the HFRI Emerging Markets: Russia/Eastern Europe Index surged +22.7 percent, as reported by the latest HFR Asian Hedge Fund Industry Report and the HFR Emerging Markets Hedge Fund Industry Report.

The investable HFRI 500 Fund Weighted Composite Index, which includes funds across all regions in both Emerging and Developed markets, has gained +8.8 per cent YTD 2021 through November.

Total Emerging Markets hedge fund assets increased to a record of USD275.5 billion to end 3Q21, representing an increase of USD1.8 billion over the prior quarter and USD18.9 billion since year end 2020.

While EM hedge fund performance was led by India and Russia, other EM regions posted mixed performance. The HFRI MENA Index advanced +15.8 percent YTD through November, while the HFRI EM: China Index posted a narrow gain of +0.14 percent YTD. The HFRI EM: Latin America Index declined -8.0 percent YTD through November, as both inflationary and supply chain pressures continued to build.

Hedge funds across EM regions including Korea, Russia, China, and the Middle East (as well as Japan) have become increasingly active in volatile cryptocurrency trading. Despite recent volatility, the HFR Cryptocurrency Index has surged +300 percent YTD 2021 through November, leading overall industry performance gains.

Total capital invested in Asian hedge funds increased to a new record of USD139.4 billion to end 3Q21, representing an increase of nearly USD1.0 billion over the prior quarter and USD13.5 billion since year-end 2020.

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