19/08/2010 Author: Ben Haidari

Emerging market funds suffer investor outflows

Emerging markets (EM) hedge funds suffered a net withdrawal of $1.5bn in the second quarter of 2010, according to figures released today by Hedge Fund Research.

This decline represents the seventh of the last eight quarters in which EM hedge funds have experienced a net capital withdrawal, while total capital invested in EM hedge funds during Q2 has declined by $3.2bn, ending  the quarter at just under $95bn (taking into account performance-based losses as well as redemptions).

The outflows are in stark contrast to the performance of hedge fund industry as a whole, which experienced a net capital inflow of $9.6bn in Q2 and a first half capital inflow of $23bn (compared to over $2bn of investor withdrawals from EM hedge funds over the same period).

EM outflows were region-specific, with Russia and Emerging Asia hardest hit by redemptions, while Latin America and the Middle East enjoyed new investor allocations.

Strategy-wise, EM funds in Equity Hedge suffered total redemptions of $1.8bn, a loss which was only partially offset by inflows of $320m to Macro EM funds.

The HFR figures also reveal the impact that recent commodity market volatility has had on the performance of commodity-focused hedge funds, with the HFRX Commodity Index down -5.6% year to date (YTD).

Hedge funds focused on metals, agricultural and energy commodities have all been subjected to a negative performance YTD, despite broad divergences across different commodity markets.