Total capital invested in Asian hedge funds rose to a record in the second quarter as gains based on the funds’ performance more than made up for a sharp slowdown in the entry of fresh capital, according to industry analysis firm Hedge Fund Research (HFR).
Hedge funds in Asia managed a total of $116.7 bn at the end of the second quarter, an increase of 2.4 percent from $114 bn at the end of the first quarter, HFR says in a press release. Capital invested in Asian hedge funds represented only 4.2 percent of the $2.8 trn invested in hedge funds globally at the end of the second quarter.
At the same time, the net inflow of new capital into hedge funds specialized in Asia plunged to $162 mn in the second quarter from $2 bn in the first quarter and $3 bn in the second quarter of last year. The reduction was led by net outflows from funds that focus on emerging Asia and those that specialize in hedging in Asian equities.
Rising geopolitical risks in Ukraine and the Middle East, renewed uncertainty over a European economic recovery, the increasing likelihood of near-term interest rate gains in the US and other factors may have helped spur performance gains in Asia while discouraging entry of new funds into a more volatile global environment.
‘The recent performance acceleration in Asian hedge funds has coincided with increasing investor concern regarding the near term strength of the global economic recovery in the US and Europe, increasing geopolitical tension in the Middle East and Russia, steep losses in commodities and rapid shifts in the asset volatility environment,’ says Kenneth Heinz, president of HFR.
As of the end of the second quarter, China was the most common base for hedge funds specialized in Asia, accounting for about a third of the total, HFR says. Singapore was the second most popular site for headquarters, with 11.4 percent, followed by Australia with 5.6 percent and Japan, with 4.3 percent.
