Emerging market hedge funds gained 7.3% to show their best first-quarter start since 2006, according to data analysts Hedge Fund Research Inc (HFR).
The HFRI Emerging Markets (Total) Index posted the increase for the three months ending April 30, 2012.
A report published by the firm also claims the capital invested in hedge funds has hit a record US$127 billion – nearly $10 billion up on the previous quarter and ahead of the $123 billion posted for Q2 2011.
The increase is attributed to gains rather than new investment.
Inflows totalled $3.1billion, while outflows added up to $3.4 billion, leading to a small net outflow of $365m in the quarter.
New investment mostly went to Emerging Asia and Russia/Eastern Europe, which picked up $500 million in net new capital combined.
The number of emerging market hedge funds is growing in numbers, and stands at a record 1,059 global funds. The old record of 1,046 was set in 2007.
Almost half of all emerging market funds invest in Asia, while the number of funds for the Middle East and North Africa (MENA) were up 20%.
More than 15% invest in Russia and Eastern Europe, while around 10% operate in Latin America.
The biggest gains were from funds investing in India, with the HFRX India Index adding 18.8% during the quarter.
“Hedge funds investing in emerging markets continue to exhibit a resiliency to many of the developed market centric risk factors which continue to dominate investor concerns, posting record gains as developed market economies struggle with outstanding debt, low fixed income yields and weak growth prospects,” said Kenneth J. Heinz, President of HFR.
“In a similar manner to the broader global economy, emerging market hedge funds will play a crucial role serving as the growth engine in the expansion of the hedge fund industry by offering sophisticated, transparent investment strategies in emerging economies to a growing audience of global investors.”
