Asia-focused hedge funds rebounded last month after a volatile summer, with regional strategies reporting narrow gains, according to data provider Eurekahedge.
Asia ex-Japan managers gained 2.73% last month, against a -1.14% loss in the benchmark MSCI Asia Pacific ex-Japan index. In the first nine months of 2013, regional managers returned 6%, outperforming the market by 7%.
Funds focused on Greater China and India, meanwhile, returned 2.14% and 6.93% respectively last month, compared with a 3.64% gain on the Shanghai Composite index and a 4.08% rise in India’s Sensex. In the nine months ending September 30, Greater China funds finished up 11.21% while Indian funds were down -11.61%.
EM performance was boosted by underlying currencies strengthening against the dollar and risk appetite returning among global investors, says Eurekahedge. This marks a shift from earlier this summer, when investors yanked billions from emerging markets due to weakening currencies, widening current-account deficits and hints about tapering of the US quantitative easing programme.
Japan-focused hedge funds also posted gains in September, returning 2.6%. In the first nine months of 2013, Japan long/short strategies were up 20.04%, against a 37% gain by the Nikkei 225. This came on the back of both Abenomics-style stimulus and a continuation of the August rally in Japanese stocks that was sparked by news that Tokyo will host the 2020 Summer Olympics.
Global markets remained in “headline-following mode” last month, says Eurekahedge. They rose in the few weeks after the likelihood of a US-led strike in Syria diminished. Positive macroeconomic data from Europe and China also boosted indices, while the Federal Reserve’s decision to maintain its asset purchasing added strength to the rally.
But the run-up to the US government shutdown – which took place on October 1 – reversed these trends, with markets declining in the latter part of the month.
On a global basis, all strategies were in the black in September, barring CTA/managed futures funds, which fell -0.49% last month, in their fifth consecutive month of losses. This compares to a -3.39% drop by the S&P Goldman Sachs Commodity Index, as a result of falling prices of precious metals, energy and soft commodities.
Global long/short funds, meanwhile, posted the strongest gains by category last month, returning 2.27%. Global event-driven was the next best performer at 1.68%.
Despite seeing decent inflows the first eight months of the year – year-to-date through September 30, Asian hedge funds took in $10 billion – regional asset flows were flat last month.
While most of these inflows went into Asia ex-Japan funds, Japan hedge funds have been receiving more allocations of late. These strategies had experienced outflows of $4 billion from June 2012 through May 2013, but from June to September they took in $350 million.
Global hedge fund assets stand at $1.91 trillion, not far off their June 2008 peak of $1.95 trillion.