21/04/2010 Author: Tony Griffiths

Emerging market investors favour a global approach

The demand for global-facing emerging market hedge funds is on the increase as the undulating performance of certain emerging countries prompts investors to shun region-specific vehicles.  

“Most investors, particularly post-crisis, prefer to find mangers that make country-specific decisions for them,” said Charles Robinson, global head of marketing and sales at HSBC Global Asset Management. “Having been hurt in China and India specifically, many prefer to have a global solution or a pan-regional product these days.”

Last month, HSBC launched its Ucits-compliant GEM (Global Emerging Market) hedge fund, which is expected to reach $100m by year-end, and Robinson recently returned from an asset-raising trip to Asia where a number of investors expressed interest in becoming day-one participants.

Investment consultant Redington has experienced similarly strong appetites from investors. “We have certainly seen a significant increase in interest from our pension fund clients in emerging markets,” said David Thompson, a Redington director. “Looking at the expected future economic activity in emerging markets relative to developed markets over the next five-to-ten years, more clients are realising an increased allocation to a diversified emerging market portfolio makes sense.”

Emerging market hedge funds have grown in popularity over the last 12 months, with growth in the recession-hit developed world continuing to stutter, though success has rotated among markets. According to indices at data provider Hedge Fund Research, Russia has been the best-performing emerging market in 2010, up over 10% for the year, while Asia-Ex Japan, the hot-pick of 2009, has stalled on -2.08%.