Asian hedge-fund assets fell 36% in 2008, shrinking more than the global average, as the biggest market declines since the Great Depression prompted performance losses and investor redemptions, according to Hedge Fund Research Inc.
Assets peaked at US$111 billion at the end of 2007 for hedge funds invested in Asia and stood at US$71 billion in the fourth quarter last year, according to the Chicago-based industry researcher. The global hedge-fund industry peaked at US$1.9 trillion in mid-2008.
The hedge-fund industry worldwide shrank by more than 20% to US$1.5 trillion at the end of last year, and averaged losses of about 19%, as measured by the HFRX Global Hedge Fund Index. The MSCI World Index, which tracks stocks in developed nations, tumbled a record 42% in 2008.
“Last year was a year of flight to quality and flight to liquidity, even in the hedge-fund industry,” said Toyomi Kusano, president of Kusano Global Frontier, a hedge-fund research firm in Tokyo. “Emerging Asia was especially hit, and reduction to hedge fund allocations will likely continue.”
Capital dedicated to investing in Japan declined about 5%, relative to other Asian regions, Hedge Fund Research said in an e-mailed statement. Meanwhile, hedge funds investing in emerging Asia produced annualised gains greater than 8% over the last three-years, exceeding global and equity market benchmarks over the same period, the report said.
In terms of management firm locations, excluding the US and the UK, China and Singapore are the preferred places for Asian hedge funds, representing 36% and 20% respectively, the statement said.
“As investors perceive opportunities and risk tolerance recedes from extreme levels, we expect to again see leadership and growth from the Asian hedge fund industry,” Kenneth J. Heinz, president of Hedge Fund Research, said in the statement.
Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.