Asia-Pacific Hedge Funds: Who Owns the Bull in This China Shop?

by Benson Tay

  • 22 Mar 2016
  • HF

Asia-Pacific markets experienced a volatile 2015. Stock market booms and corrections significantly affected the returns of many hedge funds focused on the region, while the slowdown in China was cited by 38% of fund managers in the 2016 Preqin Global Hedge Fund Report as a leading reason as to why objectives for the year were not met. However, despite the erratic markets, the Preqin Asia-Pacific Hedge Fund benchmark generated a higher annualized return in 2015 than any other top-level region (+7.39%), surpassing the Preqin All-Strategies Hedge Fund benchmark (+1.87%). This blog will analyze the performance of hedge funds focused on the Asia-Pacific region and how performance differed across sub-regions.

Data from Preqin’s Hedge Fund Online shows that the Asia-Pacific sub-regions – Greater China (+7.15%), Australasia (+7.50%) and the Far East (+4.18%) – all outperformed the Preqin All-Strategies Hedge Fund benchmark for 2015. Funds with specific exposure to Greater China experienced the greatest amount of volatility in 2015: they generated higher returns in the first half of the year on the back of Chinese capital market reform, but were the most exposed to the downturn later in the year.

In August 2015, the People's Bank of China allowed the yuan to depreciate by nearly 2% against the US dollar. Funds focused on the region returned -6.20% in both July and August 2015, although August also saw negative returns for all hedge funds (-2.18%) and Asia-Pacific-focused funds (-3.85%). Various strategies experienced recovery in October 2015, but Asia-Pacific-focused funds were able to capture a greater amount of the upside, with Greater China (+4.09%), the Far East (+2.99%) and Australasia (+2.64%) each outperforming the All-Strategies Hedge Fund benchmark in October (+1.89%).

Out of the three sub-regions, Australasia-focused funds generated the highest level of returns in 2015 (+7.50%), above Greater China- (+7.15%) and Far East-focused funds (+4.18%). With less exposure to the Asian markets, Australasia-focused funds delivered steadier, less volatile returns in 2015 and were able to capture positive market movements while limiting their downside throughout the year. Conversely, Far East-focused funds were not able to generate returns at the levels of the other sub-regions towards the end of 2015, experiencing losses in September, November and December, and ending the year almost three percentage points lower than Greater China-focused funds.

By November 2015, the Shanghai Composite Index had gained 20% from the recent low in August; funds focused on the three Asia-Pacific sub-regions were able to capture upside from the stock market rally in the final quarter of 2015, driving them to outperform the All-Strategies Hedge Fund index in 2015.


Continue browsing industry reports, publications, conferences, blogs and more on Preqin Insights