Investors increased their allocation to global emerging markets hedge funds by more than 60% from the first to the second quarter, according to new data. Hedge Fund Research Inc. said that investors allocated approximately $995 million to such alternative investment funds.
Total inflows into emerging markets hedge funds fell 72% from a year earlier, when such funds had $3.7 billion of inflows.
Hedge Fund Research, a unit of HFR Group LLC, said that if the current pace of inflows continued for the rest of the year, total capital inflow would be the lowest since 2000, when funds in emerging markets had a net outflow of capital.
Total capital invested in global emerging markets hedge funds increased slightly, to over $111 billion, as the HFRI Emerging Markets Index gained 0.37% for the second quarter.
For the first half of the year the index was down nearly 7%, Hedge Fund Research said.
Kenneth J. Heinz, president of Hedge Fund Research, said asset-flow trends in emerging market hedge funds mirror the broader trends in the hedge fund industry.
Overall hedge fund asset inflows declined to $29 billion in the first half of the year after a record inflow of nearly $200 billion for all of last year. There were 1,061 funds investing in emerging markets at the end of the second quarter, just four more than the tally at the end of the first quarter.
Just over 5% of emerging market hedge funds are based in the United States or the United Kingdom, but the number of funds in Brazil, Singapore, Hong Kong and the United Arab Emirates rose in the second quarter. There was a slight increase in the percentage of emerging market hedge funds that focused on macro strategies in the quarter. At the same time, fewer emerging market hedge funds are focused on more directional equity hedge strategies, Hedge Fund Research said.
With the exception of the HFRI Emerging Markets Latin America Index, which increased more than 3% during the first half of the year, there have been year-to-date performance losses across every other region.
Emerging Asia funds have declined more than 5.4% in the last 12 months. Over
the past five years they have had annualized returns of 19%.
While overall flows have slowed, investors continued to allocate assets to Emerging Markets hedge funds in the second quarter, indicating a continued belief in the long-term growth prospects for these developing economies,Heinz said.
Hedge Fund Researchs data is based on tracking performance and asset allocation of more than 13,000 hedge funds.