Emerging-Markets Hedge-Fund Assets Reach Record in '16, HFR Says

  • Performance in Latam, Russia, Eastern Europe contributes
  • Assets under EM funds mark second straight quarterly record

Emerging-market hedge-fund assets reached a record at the end of last year, thanks to gains in energy prices and a strengthening dollar, according to Hedge Fund Research Inc.

Assets of developing-markets hedge funds rose to $200.7 billion as of the end of December, marking the second straight quarterly record after an increase of $9.3 billion for the entire year, according to a report from the industry researcher received Thursday. Global hedge-fund assets increased by $121.6 billion in 2016 to $3.02 trillion, it showed.

“Strong performance gains, specifically focused in Latin America and Russia/Eastern Europe, contributed to this growth, as investors positioned for the impacts of divergent monetary policies in U.S. and Europe on emerging markets,” HFR’s President Kenneth J. Heinz in Chicago said in the statement. “Specialized hedge funds which have demonstrated the ability to navigate these trends are likely to continue to lead industry gains in 1H17.”

Emerging-market assets have been resilient since the start of the year amid expectations that a stronger U.S. economy will fuel growth in developing nations, bolster corporate profits and support prices for the commodity exports that many of the countries rely on. The index of developing-nation currencies is near its highest since August, while that of stocks is at its most since 2015 after suffering declines following President Donald Trump’s victory in U.S. presidential election in November.

An index measuring emerging market hedge funds gained 3.2 percent in January, after rising 7 percent in 2016. Those focused on Latin America jumped 5.6 percent last month, extending a 27.2 percent surge last year. Total capital poured in Latin American-focused funds climbed to $6.3 billion in 2016, managed by more than 100 funds, while that in Russian and Eastern European-focused funds rose by $2.5 billion to $29.3 billion under more than 170 hedge funds.

The amount of capital under emerging Asia managed by over 500 hedge funds fell by $4.4 billion last year to $48.6 billion, while that in Middle-East-focused funds gained $500 million with nearly 50 funds managing $4.6 billion, according to the report.

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