Asia ex-Japan hedge funds outperform peers

Asia ex-Japan hedge funds are outperforming global peers to date this year having risen 7.26%, according to the latest Eurekahedge report, stirring expectations of stronger investor inflows.

Globally hedge funds are up 4.16% year-to-date, registering performance-based gains of $52.2 billion and seeing net asset inflows of $70.9 billion in 2014.

Long/short equity funds lead in terms of capital-raising with net asset inflows of $60 billion so far this year, followed by $16 billion for fixed income and $13 billion for event-driven strategies.

Macro and long/short equity strategies present the most interesting prospects for Asian hedge fund managers, according to a recent report from Cambridge Associates titled Investing in Asian Hedge Funds: Opportunities and Challenges.

That conclusion appears counter to a trend which has seen long/short equity decline from a 57% share of Asian hedge fund assets under management (AUM) in July 2007 to 34% by July 2013, according to the report. 

The authors of the Cambridge report note that an increasing number of Asian companies are being listing on exchanges outside Asia, where short-selling is permissible. This is expanding the universe of stocks that Asian hedge fund managers can short, underpinning the potential for the strategy.

At the same time, a more diverse range of Asian hedge fund strategies have emerged – including Asia-based macro strategy managers. Macro strategy Asian hedge fund AUM almost doubled between July 2007 to July 2013.

According to Eurekahedge data, CTA/managed futures hedge funds delivered the best returns among all strategies in July, up 2.41%, and up 4.53% year-to-date, although investors have redeemed $12 billion from the strategy in 2014 alone.

India-investing hedge funds continue to record strong gains, reporting their seventh consecutive month of positive returns — up 2.54% in July, and 28.5% year-to-date.

In fact, much of the 7.26% return for Asia ex-Japan managers this year was attributed to exposure to Indian equities, which have risen 25.8% since the start of the year, Eurekahedge noted.

Funds with a Latin or North American mandate vied for second place, delivering returns of 5.93% and 5.63%, respectively. Japan-focused funds returned 2.21%, while European managers came in last at 1.41%, Eurekahedge said.