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Asian Hedge Funds Underperformed the West

Asian hedge funds managed $125.4 billion as of 2012-08-31, compared with $358.8 billion in Europe and $1.2 trillion in North America, according to Eurekahedge, a Singapore-based data provider. According to Hedge Fund Research Inc, investors have withdrawn $447 million this year from Asian hedge funds, while 73 of them have closed in 2012. Seventy-seven percent of the funds in the region are equity-related, versus 46 percent globally.

The Eurekahedge Asian index tracking 395 hedge funds returned 1.6 percent this year through August, the worst performer among regions and about half the 3.2 percent gain by the global benchmark.

A Eurekahedge global index that tracks long-short equity funds that bet on rising and falling stock prices has gained 2.8 percent this year through August. The similar index for Asian funds advanced 1.1 percent in the period.

QAM Asian Equities Fund declined 19.4% through August as stock-market moves have been driven by macro-economic and political news related to the debt cycle rather than company fundamentals, said Frank Holle, the Kuala Lumpur-based co- founder of Quant Asset Management Pte Ltd.

Photo of the Kuala Lumpur, Malaysia.

Photo of the Kuala Lumpur, Malaysia. (Photo credit: Wikipedia)

Among funds investing in equities, Senrigan Capital Group Ltd., the $620 million Asia-focused event-driven fund backed by Blackstone Group LP, lost about 16% through August, a person with knowledge of the information said, asking not to be identified because the information is private.

The Eurekahedge index tracking Asian funds dropped 8.3 percent in 2011, its second-worst year on record, after 2008. The Asian index has underperformed global peers since 2009, when it had a record annual return, Eurekahedge data show.

In Asia, the composite of the hedge fund according to  Chicago-based HFR’s data, relative-value funds that attempt to profit from price discrepancies between markets made up 12% of hedge-fund strategies in Asia, while event-driven funds that bet on corporate events such as mergers accounted for 6.3% and macro funds, which seek to profit from economic trends by trading stocks, bonds, currencies and commodities, made up 4.6%.

“Many Asian hedge funds remain equity focused and long biased, making them more exposed to equity-market volatility,” said Fred Ingham, London-based Asia head of hedge-fund investments at Neuberger Berman Group LLC’s alternative-assets division. “A lack of hedging tools relative to the West, coupled with a tendency to try to capture market upside, has meant that Asian hedge funds have struggled in difficult global and regional equity markets.”

Reference:  Bloomberg, Tomoko Yamazaki and Bei Hu, 2012-09-25, “Asia’s Hedge Funds Find GDP Growth Doesn’t Help Returns”