20/06/23

ASIA: Japanese hedge funds gain as bank risk spikes

As published on: hedgeweek.com, Monday 26 June, 2023.

Japanese and emerging markets hedge funds extended gains to begin 2023, driven by optimism toward peaking US and global inflation, and the near end of the US-led interest rate increasing cycle, according to the latest HFR Asian Hedge Fund Industry and HFR Emerging Markets Hedge Fund Industry reports.

Asian currencies, including the Japanese yen and Chinese yuan, fell to historic lows against the US dollar, driving strong gains in the Nikkei; the HFRI Japan Index advanced +1.8% YTD through May. Similarly, the HFRI 500 Emerging Markets Index added +1.3% YTD through May, with gains across equity hedge and cryptocurrency exposures.
 
With the military conflict following the Russian invasion of Ukraine entering its second year, hedge funds investing in Eastern Europe and Russia continued to navigate unprecedented uncertainty, with the HFRI EM: Russia/Eastern Europe Index falling -15.6% YTD through May; this following a steep decline of -40.3% in 2022.
 
The investable HFRI 500 Fund Weighted Composite Index, which includes funds across all regions in both Emerging and Developed markets, gained +0.2% YTD through May, led by the HFRI 500 Equity Hedge Index, which jumped +1.8% YTD.

Total emerging markets and Asian hedge fund assets were steady to begin 2023, with Emerging Markets little changed at an estimated $244.0 billion, while total capital invested in Asian hedge funds increased narrowly to $125.9 billion in 1Q23.
 
Regional emerging markets indices also posted gains to begin 2023, as the HFRI EM: India Index surged +6.1% YTD through May, while the HFRI EM: Latin America Index jumped +5.9%. The HFRI EM: MENA Index added +2.4% YTD through May, while the volatile HFRI EM: China Index fell -1.9% over the first five months of the year; this after falling -19.3% in 2022.
 
Hedge funds with high exposure to cryptocurrency across EM regions including Japan, Korea, Russia, China, and the Middle East have surged thus far in 2023, with the volatile HFR Cryptocurrency Index vaulting +21.3% YTD through May; this after plunging -54.0% in 2022.

Tags

Japan Hedge Funds Bank Risk