Asia-Pacific-Focused Activist Hedge Funds and Their Recovery from a Poor Start in 2016

by Jamie Fisher

  • 04 Jan 2017
  • HF

Preqin’s recent Hedge Funds in Asia-Pacific factsheet demonstrated that Asia-Pacific-focused hedge funds have trailed in comparison to the Preqin All-Strategies Hedge fund benchmark in terms of 2016 cumulative performance. When taking a closer look, the performance of activist hedge funds focused on Asia-Pacific has fallen behind funds focused on North America. Although the Preqin Activist Asia-Pacific benchmark posted a positive 2016* cumulative return (+1.54%), these funds have been outperformed by their North American counterparts (+7.78%), as shown in the chart below. 2016* has seen the lowest year-to-date cumulative return for Asia-Pacific-focused activist hedge funds since 2011.

However, looking beyond the headline returns reveals a more nuanced story during 2016. A poor start to the year across both January and February has significantly hampered the benchmark’s performance, posting -5.58% and -3.61% respectively. The slowdown of the Chinese economy throughout H2 2015, following a devaluation of the yuan, would have caused a spillover effect into the beginning of 2016 as markets attempted to recover. Despite these turbulent conditions, Asia-Pacific-focused activist hedge funds recovered in March 2016, posting a return of +5.28%, the highest return for the benchmark since April 2015. This came after the economy demonstrated resilience as industrial output, fixed-asset investment, retail sales and new credit all exceeded growth expectations in March.

This recovery continued throughout the rest of 2016, with funds posting positive returns for all but one month for the remainder of the year and generating returns similar to those of North America-focused activist hedge funds since March 2016. Asia-Pacific-focused activist funds outperformed their North American counterparts for the three-month cumulative return to October 2016.

*Please note, all performance information includes preliminary data for December 2016. Although stated trends and comparisons are not expected to alter significantly, final benchmark values are subject to change.

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