Asia ex-Japan hedge funds were the best performers in May, gaining an average of 2%, although managers from industry hotspot Japan saw a small loss of -0.15%, according to data provider Eurekahedge.
Latin America was the only other region with a negative average return last month (-0.4%) while North American and European hedge funds registered respective modest gains of 1.06% and 0.9%.
Although Japan’s slight dip marked the end to an eight-month run of positive returns, it is lower than last month’s losses by benchmark indices Topix (-2.52%) and Nikkei 225 (-0.62%).
In the six months to mid-May, Japan’s exchanges have had strong market rallies on the back of fiscal stimulus measures, which have helped boost hedge fund returns. However, a market correction last month has led to volatile trading conditions.
Japan nevertheless remains the best-performing region so far in 2013, with managers having gained an average of 16.6% in the first five months of the year. Asia ex-Japan managers have had the second-best gains during the same period, with 6.9%.
The average performance of Japan-focused managers was pulled down by event-driven strategies, which lost -4%, while long/short equity, commodity trading advisor (CTA) and multi-strategy funds had modest gains.
Asia ex-Japan strategies generally fared well across the board, with long/short equity, event-driven, fixed income and multi-strategy funds turning in gains, with only CTAs registering an average negative return (-1.49%).
Despite the good performance from hedge funds in the region, Eurekahedge estimates that Asia ex-Japan strategies saw $400 million in net outflows last month, bringing total AUM to $124.7 billion.
Japan’s comparatively smaller hedge fund sector had even greater net outflows of $500 million, leaving it with industry assets at $14.9 billion.
By contrast, there were net inflows of $3.9 billion to hedge funds in North America and $1.8 billion to European strategies.
Given the good performance among Asian strategies, the outflows are “counter intuitive”, notes Eurekahedge. “In the case of Asia ex-Japan hedge funds, the outflows could be due to the increased volatility in underlying markets and lacklustre economic data from China, which has led to some concerns among investors,” it notes.