Hedge funds investing in emerging markets have proved that it is a lucrative business, by outperforming their benchmarks this year, The National Post reports. Hedge Fund Research Inc. reported that hedge funds investing in emerging markets delivered returns of 14.7% in the first nine months of the year through September, as tracked by the HFRI Emerging Markets Total Index. This number contrasts with the 7.3% increase in the HFRI Fund Weighted composite index in the period.
This year's performance is keeping pace with the two previous years. The emerging market index gained 18.42% in 2004 and 39.36% in 2003.
HFR estimates that approximately $4.1 billion was poured into emerging markets hedge funds in the first two quarters of 2005, which followed $4.7 billion in 2004, and $3.3 billion in 2003. The estimated number of hedge funds investing in emerging markets is approximately 350. That is just a tiny portion of the estimated 8,000 funds out there. The HFRI Emerging Markets Total Index tracks 140 hedge funds.
Recent stock prices as well as sovereign bonds both boosted up the performance and stability of the emerging markets fixed income and equities.
Meanwhile, HedgeFund.net reported that hedge funds rose 1.73% in September and are up 6.32% through the first nine months of this year. The top 25% of hedge funds delivered returns of 2.62% in September and 9.73% in the first nine months. The bottom 25% performed at 0.34% for the month and a year-to-date figure of 1.31%.
The top-performing hedge fund sector in September was emerging markets funds, which rose 3.71%, far outpacing the S&P 500, which was up 0.70%.