Asia-Pacific-Focused Hedge Funds Reverse 2016's Misfortune

by Jamie Fisher

  • 27 Jun 2017
  • HF

Preqin’s report on the outlook for hedge funds in Asia-Pacific (APAC) identified fund performance, in particular, as a common concern among fund managers surveyed by Preqin in November 2016. Performance was cited as a key driver for change in the industry heading into 2017 by 76% of respondents. However, performance gains for APAC-focused funds in Q1 2017 may give rise to renewed optimism for the region; the Preqin Asia-Pacific-focused hedge fund benchmark generated returns of +4.64% for Q1 2017, the second highest return of any top-level regional focus. Additionally, this has also proven to be APAC’s strongest first-quarter performance since 2013.

*Please note, all performance information includes preliminary data for May 2017 based on net returns reported to Preqin in early June 2017. Although stated trends and comparisons are not expected to alter significantly, final benchmark values are subject to change.

As shown in the chart above, this has been predominately driven by equity strategies and event driven strategies, which posted +5.63% and +3.88% respectively since the turn of the year. Furthermore, APAC-focused event driven strategies in Q1 continued the strong returns seen at the end of 2016, bringing the benchmark’s 12-month cumulative return to +16.49%, while also maintaining a streak of nine months of consecutive positive performance. Strong economic growth in APAC, particularly in China and Hong Kong, has exceeded forecasts, while a weaker yen boosted external demand and increased exports in Japan. Both factors may have contributed to improved performance figures across the region.

This has been promising news for the industry, helping to counteract the lacklustre performance throughout 2016. Although fund managers were optimistic about performance going into 2017 – believing returns would exceed 2016’s – many investors in the region were not convinced: 57% of APAC-based investors were looking to invest less capital in the asset class over 2017 than they did in 2016. However, according to Preqin’s recent Q1 2017 hedge fund asset flows report, 55% of APAC-based funds received inflows over the quarter, and managers in the region gained $2.2bn in assets, which may be an indication that investors’ sentiment towards the region has shifted.

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