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Growth accelerates in emerging markets hedge funds.

Byline: (Staff Writer)

The HFRI Emerging Markets (Total) Index gained 18.92 percent for the quarter compared to a gain of 9.17 percent for the HFRI Fund Weighted Composite Index, HFR's broad-based gauge of industry performance. Through the first six months of the year, emerging markets funds returned 20.18 per cent, the best first-half for emerging markets strategies since a 27.4 per cent gain in 1H 99.

The 2009 emerging markets performance follows the historic decline of 37.26 per cent for the HFRI Emerging Markets (Total) Index in 2008, the worst year of performance on record for Emerging Markets since HFR began tracking the category in 1990.

In spite of stellar performance, investors continued to withdraw assets from emerging markets during the quarter, with $2.5 billion in capital exiting the regions during the period. This was more than offset by positive market returns totalling $12.9 billion, resulting in a net increase of $10.4 billion in emerging markets assets in 2Q. Assets in hedge funds focusing on emerging markets now stand at $77 billion.

Additional findings from the HFR data include:

Middle East/North Africa (MENA): while still the smallest emerging market region in terms of dedicated capital, hedge funds focusing exclusively on MENA have seen a 10-fold increase in AUM over the last five years. There are currently more than 20 hedge funds that invest exclusively in this rapidly growing region, and the HFRX MENA Index has gained 16.9 per cent through the first half of 2009.

Latin America: after posting the smallest loss in 2008 among all the emerging markets regions, the HFRI Emerging Markets: Latin America Index gained 21.6 per cent in the first half. More than 100 funds invest exclusively in Latin America, representing nearly 10 per cent of all Emerging Markets funds.

Russia/Eastern Europe: the HFRX Russia Index gained 25.3 per cent in 2Q 09, making it the strongest region in terms of quarterly performance. Funds investing in Russia/Eastern Europe manage greater than 20 per cent of all emerging market hedge fund capital.

Emerging Asia: more than 465 funds currently invest in Emerging Asia, representing almost half of all emerging earkets funds. After sharp losses in 2008, the HFRX China Index has gained 43.1 per cent YTD through July.

"The hedge fund industry has continued to evolve through the current period of consolidation, and in no place is this evolution more apparent than in funds investing in Emerging Markets," said Kenneth Heinz, president of Hedge Fund Research. "Emerging Markets hedge funds are now larger, more sophisticated, more strategically diverse, more structurally transparent and better positioned to offer global investors access to dynamic growth opportunities around the world."

2009 CPI Financial. All rights reserved.

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Publication:CPI Financial
Date:Aug 26, 2009
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