Asian hedge fund assets rise to $134 billion

Asia ex-Japan hedge funds saw healthy net inflows of $1.6 billion in May, bringing total assets under management to $134.3 billion, according to data provider Eurekahedge.

While the numbers are healthy, asset allocations for Asia ex-Japan have not matched the rate of launches. As a result, the Singapore-based firm has revised downwards its forecast for year-end AUM to $150 billion -- from the $180 billion it projected in May.

New fund launches in the region have been relatively small in size, says Eurekahedge senior analyst Farhan Mumtaz. He also notes that funds of funds, which in the past have allocated money to smaller hedge funds, “have themselves not received much capital since the financial crisis”.

Japan hedge fund managers have a better case for optimism, with total AUM reaching a post-crisis $16 billion last month on the back of $200 million in net inflows. The Japanese hedge fund industry reached a pre-crisis AUM high of $22.6 billion in January 2008 and was at its peak in 2006, when it had $39 billion in assets.

Investors – both domestic and overseas – had been hesitant to allocate to Japanese funds following a massive earthquake in the country in March. However, stabilisation of the market and relatively good returns have helped to drive recent capital flows.

“Japanese hedge funds have delivered better risk adjusted returns over the longer term, as opposed to other investment vehicles investing in the market,” says Mumtaz. He notes that since January 2000, Japanese hedge funds have had returns of 83%, while the Nikkei index dropped 50%.

In May, Japan hedge funds were down by 0.41%, and have had a relatively flat performance over the past three months, with the Eurekahedge Japan Hedge Fund Index losing 2.62% since March. However, it compares favourably to the 8.76% loss registered by the Nikkei index during the same period.