Study: Hedge Funds Reach New Record in EM Investments in Q1

(June 6, 2011) — Emerging hedge fund assets have risen to $121 billion in the first quarter of 2011, surpassing the previous record level of $117 billion set in 2007, according to data from Chicago-based Hedge Fund Research.

The industry tracker noted that hedge fund assets in emerging markets have reached the new record level in the first quarter of 2011 as global investors increased exposure to emerging Asia and Russia.

The quarterly asset increase of over 6.5% includes an inflow of nearly $2.3 billion in new capital, concentrated primarily in emerging Asia, as well as $5.1 billion in performance-based gains, with these concentrated in Russia and multi-emerging market regions.

“The record level of assets invested in emerging market hedge funds represents the latest evidence that global investors continue to exhibit a preference for accessing specialized emerging markets exposure via hedge funds,” said Kenneth J. Heinz, President of HFR. “As a direct result of the strategic specialization, sophistication and improved structure of emerging market hedge funds, the number of funds located in Brazil, China, Russia, Singapore and UAE all continue to grow, and we expect this trend to continue in 2011 and in coming years.”

The continued growth and popularity of emerging markets, namely less developed frontier economies, has been widely reported. In April, Brazil ranked above China as the premier emerging market destination for private equity investors in the next 12 months, according to a study by the Emerging Markets Private Equity Association and London and New York-based Coller Capital. Meanwhile, a March report by State Street Global Advisors’ (SSgA) showed that institutional investors should look toward smaller emerging markets to boost returns.