Hedge Fund Investing Hits Monthly Record Gain in China

May 14 2015 | 2:59pm ET

Hedge funds investing in China struck a monthly record gain in April fueled by a surge in trading volumes and recent decisions by the Chinese Central Bank to slash interest rates.

In April, the HFRI China Index rose by 13.0%, its strongest monthly gain since the Index’s inception in 2008.

Total global capital invested in the Asian hedge fund industry surpassed the milestone of $120 billion to begin the second quarter of 2015.

In addition, as the number of Asian hedge funds is fast approaching 1,200, according to the latest HFR Asian Hedge Fund Industry Report, released by HFR. Total capital invested in the hedge fund industry increased to a record $2.95 trillion at the beginning of the second quarter 2015.

The HFRI EM: Asia ex-Japan Index returned 10.5% in April, the strongest gain since an 11.3% gain in December 1999. Through the first four months of 2015, the HFRI China Index and HFRI EM: Asia ex-Japan Index have increased 18.8% and 14.5%, respectively, following more muted gains from 2014.

Inflows into Asian hedge funds through the end of the first quarter hit $1.1 billion, the tenth consecutive quarter of inflows, with capital moving into Emerging and Pan-Asian funds only partially offset by outflows from Japanese-focused funds. Asian hedge fund inflows were also concentrated in Equity Hedge strategies, with these receiving inflows of $1.44 billion, partially offset by outflows across other strategies.

Total hedge fund capital invested in Emerging Asia increased to $52.5 billion, while capital invested in Pan-Asian hedge fund strategies increased to $39 billion. Total Asian hedge fund capital invested in Japan declined slightly to $29.2 billion. The HFRI Japan Index advanced 5.0% in April and has gained 7.8% since January 1, following a gain of 3.5% in 2014.

“Recent developments with Chinese equity markets, including performance and trading volume, are both exciting and historic in magnitude, with significant involvement and participation from Asian-focused hedge funds attracting capital and interest from global investors,” stated Kenneth J. Heinz, President of HFR. “As exciting as the environment has been, it is likely that the Asian hedge fund industry is only now at the beginning of a capital growth cycle, as global investors position for continuation and extension of these gains, while seeking to use sophisticated strategies to protect their portfolios from the volatility inherent in these markets.”

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