21/05/2010 Author: Shannon Hawthorne

EM hedge funds offset investor outflows with strong April performance

Emerging markets (EM) hedge funds boasted an impressive performance in April despite some investor redemptions, according to a recent report by Hedge Fund Research (HFR).

The effective use of credit default swaps (CDS) and a variety of hedging techniques saw emerging market funds post year to date (YTD) gains of 4.7% last month, despite  volatility in currency, commodity and underlying equity markets and the continuing sovereign debt crisis in Europe.

A strong performance in the first quarter of 2010 saw EM funds’ total assets under management increase by $5.3bn to $98bn, offsetting a relatively small investor net capital outflow of $560m.

The appeal of Latin American became increasingly evident as investors allocated over $500m to the region alongside funds investing in multiple emerging markets, while, in contrast, total redemptions from Asia (ex-Japan) and Russia/East Europe-focused funds totalled over $1bn.

“Throughout the ongoing EU-centric sovereign debt crisis, EM hedge funds have continued to demonstrate strategic sophistication and performance resilience,” said Kenneth Heinz, president of Hedge Fund Research. “These qualities are likely to solidify and enhance the appeal of EM hedge funds to global investors in the current environment.”