Introduction
The Eurekahedge Asian Hedge Fund Index was up 7.41% year-to-date as of November 2019, supported by the robust performance of risk assets in the region resulting from the progress of the US-China trade talks. The underlying equity market, as represented by the MSCI AC Asia Pacific IMI gained 15.19% over the same period. The trade negotiation process between the two countries has faced considerable challenges throughout the year, notably when the PBOC allowed the yuan to weaken past the symbolic level of seven. The US Treasury department responded by labelling China as a currency manipulator, further escalating the tension between the two economies. However, market sentiment improved when the trade talks resumed in October, and finally concluded in a phase-one deal which was eventually signed in January 2020, shortly after the removal of China from the US Treasury list of currency manipulators. The positive geopolitical development surrounding the trade war boosted market sentiment and acted as a tailwind for the region’s equity markets toward the end of 2019. China’s two onshore benchmark stock indices, the Shenzhen and Shanghai Composite were up 25.65% and 15.16% respectively as of November 2019 year-to-date.
Figure 1: Industry growth since 1999
Figure 1 above provides the industry growth of Asian hedge funds since 2000. As of the end of November 2019, the total assets managed by Asian hedge funds stood at US$183.0 billion, while the industry population stood at 1,469 hedge funds. The number of hedge funds in the region has mostly stagnated between 2014 and 2019, even though the industry assets grew noticeably in 2017. However, the industry’s total assets contracted by US$10.6 billion in 2018. From the figure above we can also observe that the 2008 financial crisis hit the Asian hedge fund industry particularly hard, and it was not until 2018 that the industry managed to recover the lost assets and surpass the previous industry AUM peak by the end of 2007.
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