Performance of Asia-Pacific’s Major Hedge Fund Markets – November 2015

by Charmaine Choy

  • 24 Nov 2015
  • HF

Australia, Hong Kong, Japan and Singapore are the top four destinations for hedge fund management in the Asia-Pacific region. In 2014, these countries collectively managed over 90% of the $145bn in total hedge fund assets under management (AUM) in the region, as reported in Preqin Special Report: Asia-Pacific Hedge Funds. This blog will reveal the performance of hedge funds managed by the four leading countries in the region.

As seen in the chart below, Australia-based hedge funds have performed better than their peers over the course of 2015 thus far. As of September 2015, data from Preqin’s Hedge Fund Analyst showed that Australia-based hedge funds have recorded a net return of 5.81%. This outperforms hedge funds based in Japan (+1.46%), Hong Kong (+1.11%) and Singapore (-0.15%) during the same period. 

However, over the longer term, Japan-based hedge funds have delivered superior returns. These funds, which predominantly invest in long/short equity domestically, returned 26.21% and 8.82% in 2013 and 2014 respectively. This is perhaps partially attributable to the monetary easing policies of the Bank of Japan (BOJ), as a consequence of Abenomics advocated by Shinzo Abe. This, in turn, has resulted in the highest three-year annualized return (+13.12%) and five-year annualized return (9.14%).

Australia-based hedge funds have generated a three-year Sharpe ratio (RFR=2%) of 2.13. This ratio is higher than that of Japan-based hedge funds (2.03), significantly higher than Hong Kong (0.76) and Singapore (0.72), and exceeds the Preqin All-Strategies Hedge Fund benchmark (1.35). Australia-based hedge funds have also recorded the lowest volatility (+4.13%), which may make them more attractive to more risk-averse investors, although this figure is greater than that of the All-Strategies Hedge Funds Benchmark (+3.84%). In contrast, Hong Kong has the largest volatility at 10.11%.

As institutions become more sophisticated and experienced investors and the number and wealth of high-net-worth individuals in Asia-Pacific continue to grow, it will be interesting to see how the hedge fund industry in the region evolves over the next few years. How Asia-Pacific-based funds’ performance fares over the longer term, given recent economic events in the region, will likely play an important role in this development.

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