2018 Performance Monitor: Hedge Funds by Geographic Focus

by Preqin

  • 14 Sep 2018
  • PE
  • VC
  • HF
  • PD
  • RE
  • INF
  • NR

Following on from our blog on private capital fund performance by geographic focus, we explore the reasons why returns generated by hedge funds may be higher for some regions than for others.

The majority (70%) of investors interviewed at the end of 2017 cited performance as a key issue facing the industry in 2018. However, attitudes towards the hedge fund industry are improving: just under a third (29%) of investors stated their hedge fund investments fell short of expectations in 2017 compared with two-thirds of investors one year prior. The evidence behind the change in sentiment is clear: with the exception of Europe and the Preqin All Emerging Markets benchmark, 12-month hedge fund returns are higher than three-year annualized returns across all regions.


Asia-Pacific (+7.11%) and Emerging Asia (+7.01%) both had an excellent past 12 months, achieving similar returns to the Preqin All-Strategies Hedge Fund benchmark (+7.20%, as seen in the chart above). Institutional investors agree, as they reported the highest level of satisfaction with the performance of emerging markets-focused strategies.

Hedge funds focused on North America have outperformed the Preqin All-Strategies Hedge Fund benchmark in the previous 12 months with returns of 8.93%, while Europe-focused hedge funds underperformed the benchmark with returns of 4.26%. Nearly half (45%) of investors interviewed by Preqin believe equity markets may have reached a peak. As a result, there is much appetite for diversifying strategies: 22% of investors surveyed believe emerging markets currently present the best opportunities in hedge funds.

When looking at regional hedge fund performance over a three-year period, funds with a focus on emerging markets in Latin America have generated the highest returns with a three-year annualized return of 11.94%. Coupled with three-year volatility of 6.13%, such funds boast both high returns and average volatility compared to other areas.

Emerging Asia-focused hedge funds are the most volatile of all other regional funds, with three-year volatility of 10.10%. In general, emerging markets-focused hedge funds offer higher returns and greater volatility than vehicles focused on more developed regions, the exception being Africa-focused funds, which posted the lowest three-year annualized return of all emerging regions.

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*Please note, all hedge fund performance information includes preliminary data for June 2018 based on net returns reported to Preqin in early July 2018. Although stated trends and comparisons are not expected to alter significantly, final benchmark values are subject to change.

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