Asia hedge funds see inflows but lag US

A trend of asset outflows is reversing in Asia, but hedge funds are expected to find capital-raising tough this year.
Asia hedge funds see inflows but lag US

Asia ex-Japan hedge funds reversed a trend of asset outflows to attract just under $100 million of net inflows in April, although this represents a fraction of the $10.4 billion stream of new capital into the sector globally, according to data provider Eurekahedge.

The US led in capital-raising last month, taking in $11.6 billion, while Europe and Latin American hedge funds saw respective net outflows of $300 million and $1 billion. Japan fared similarly to its peers in Asia, attracting $100 million in capital.

Asia ex-Japan hedge fund assets stood at $112 billion at the end of April, up from $111.8 billion the month previous. Performance-based gains, based on an average yield last month of 0.48%, accounted for about $100 million of the asset rise.

The region saw total net outflows of $300 million in Q1, as investors redeemed from poor-performing managers. Asian hedge funds last year had an average loss of -12.61%, the worst among all regions, according to Eurekahedge figures.

However, a BNY Mellon report released this week and authored by Andrew Gordon, the bank’s head of alternative and broker-dealer services in Asia, notes that “redemptions were not as bad as people feared and some allocations to Asian managers which had been delayed started to come through towards the end of [2011]”.

In the report, titled Outlook for the Asian Hedge Fund Market in 2012 – Is A New Norm Emerging? Gordon foresees a difficult fundraising environment this year, although "indications are that allocations to emerging markets are holding up”.

He adds: “Many of those allocations have traditionally gone to global managers, either into their dedicated Asian funds or into their global funds which have substantial Asian allocations.”

It could put the region's indigenous fund sector at a disadvantage, particularly as "Asians allocating to Asian hedge funds have been sadly lacking", says Gordon.

An encouraging sign is that sovereign wealth funds in the region are said to have invested in several high-profile launches in Asia last year and may be part of a growing trend as more hedge funds adopt institutional-grade operational platforms, he adds.

Prime brokerage executives in the region expect investors to re-allocate capital this year to Asian funds that have performed well through last year’s turbulent markets and show promise for continued gains during this year's expected volatility.

The best-performing Asian strategies in the year-to-April are event-driven (up about 12.5%), relative value (11.34%) and multi-strategy (slightly under 6%), according to Eurekahedge.

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