Asian hedge funds stumble, but outlook seen as bright

August saw the sector record its worst monthly stats so far this year, further clouding a weak performance in 2011. But research house HFR sees some cause for optimism.
Asian hedge funds stumble, but outlook seen as bright

Asia-focused hedge funds were down an average of 3.05% in August, registering their worst monthly performance so far this year, according to statistics by Singapore-based data provider Eurekahedge.

Last month’s weak performance by Asian hedge funds brought year-to-date average returns down to -2.27% and further clouded a lacklustre year of mostly flat monthly performance figures.

Since January, the region’s hedge funds have had five months of negative returns, with the best monthly performance seen in April, when they had an average gain of 1.52%, according to Eurekahedge.

Volatile stock markets last month – which were rocked by the ongoing European debt crisis and a downgrade of US debt by Standard & Poor’s – contributed to poor performance of funds on a global basis, according to US-based data firm Hedge Fund Research (HFR). Yet Asian hedge funds had larger losses last month than the global average, which stood at -2.3%, according to HFR.

“The volatile environment for hedge funds in August exhibited certain similarities to the financial crisis of 2008,” says HFR president Kenneth Heinz. He noted that, as in 2008, strategies with heavy exposure to equities and credit had weak performances last month, while systematic macro funds were able to register gains.

Despite the dull performance of Asian hedge funds so far this year, Eurekahedge has a positive outlook on the sector’s growth. A recent report by the firm cited continued economic uncertainty in the US and Europe markets as a major factor that would help Asian strategies to attract capital on a global basis.

Eurekahedge estimates that total assets under management by the region’s hedge funds will grow to $180 billion in the next 12 to 18 months, up from the $134 billion at the end of June.

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