As China’s Government and regulators seek to stabilize the stock market and arrest declines, China-focused hedge funds continue to feel the impact of financial market and macroeconomic developments. While investors have, in July, witnessed negative monthly returns (-3.64%), China-focused returns are still positive for both YTD (+11.22%) and the last 12 months (+16.49%).
Preqin’s Hedge Fund Analyst shows that China-focused funds had been generating positive returns from the start of 2015 until negative monthly returns in June (-3.54%) and July (-3.64%). Asia-Pacific funds also reported a negative monthly return for June of -1.92% and Preqin’s All-Strategies Hedge Fund benchmark reported losses of -0.99%. In fact, all Preqin regional hedge fund benchmarks saw negative monthly returns for June, apart from Middle East & Israel (+1.14%).
China-focused hedge funds have generated a 12-month cumulative return figure of 20.34% as at 30 June 2015, outperforming the 12-month cumulative return figures for Asia-Pacific-focused hedge funds (+12.60%), as well as Preqin’s All-Strategies Hedge Fund benchmark (+4.68%). Financial market and macroeconomic uncertainty may continue to have a negative impact on returns over the coming months, though some strategies may help shield investors in China from market volatility.
It will likely take time for investors’ and fund managers’ confidence in China to return to positive and stable sentiment, especially with some managers having suspended fund investments and redemptions following market turmoil and subsequent intervention. As the situation continues to unfold, we will see how China-focused funds are impacted, as well as how this reverberates for funds focused on other regions.