Emerging market hedge fund performance soars in 2021

HFR’s latest data on emerging markets hedge funds showed that strategies focused on India, Russia and the Middle East significantly outperformed and were complemented by volatile cryptocurrencies.

The HFRI Emerging Markets Index was up 5.6% for the year-to-date 2021 through November, led by the India hedge funds which saw 35% gains over the same time period. Russia/Eastern Europe were up 22.7% as the overall HFRI 500 Fund Weighted Composite Index gained 8.8% for the year through November.

“Powerful inflationary pressures and global supply chain constraints have emerged as dominant trends into year-end, complicating an uncertain global recovery environment and increasing geopolitical risks in Eastern Europe,” said Kenneth Heinz, president of HFR. “Emerging Markets hedge funds have effectively navigated this complex and fluid environment, with specialized focus on EM currency volatility (i.e. Turkey), spiking global inflation, the rapid expansion of cryptocurrency trading, and shifts in energy trading relationships including refining and Nord Stream 2 pipeline implications.”

Cryptocurrencies are still on a winning streak despite recent volatility. The HFR Cryptocurrency Index has surged over 300% for the year through November.

Looking at Asia, there is growth on the horizon as well, officials at the research firm said. Asian hedge funds saw asset growth of $1 billion in the third quarter to a new record of $139.4 billion. Over the last three quarters, funds in Asia grew by $13.5 billion, according to HFR.

Overall emerging market funds saw asset growth of over $2 billion in the last quarter to total roughly $276 billion, which was a new record.

“Leading global institutions and investors looking to access powerful trends in EM and Cryptocurrency hedge funds while limiting volatility associated with these rapidly growing areas, are likely to drive continued growth and expansion through the IH22,” Heinz added.

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