EMERGING MARKETS HEDGE FUNDS SURGE, CAPITAL RISES AS MID-EAST TENSIONS ESCALATE
HFRI EM: Latin America Index vaults +11.3 percent YTD;
HFRI Japan Index adds +8.1 percent through May
CHICAGO, (June 26, 2025) – Emerging Markets hedge funds surged in May and posted strong YTD gains through May 2025 as global geopolitical and, specifically, regional middle East tensions escalated into military conflict, impacting a wide range of energy, shipping and trade. The HFRI EM: India Index surged +4.5 percent in May, while the HFRI EM: Latin America Index added +2.1 percent in May to increase its YTD return to +11.3 percent, as reported today with the releases of the HFR Asian Hedge Fund Industry Report and the HFR Emerging Markets Hedge Fund Industry Report from HFR®, the established global leader in the indexation, analysis and research of the global hedge fund industry.
The HFRI Emerging Markets (Total) Index, which covers all EM regions, advanced +2.2 percent in May and +4.8 percent YTD through May, leading the HFRI Fund Weighted Composite Index® (FWC), which is comprised consists of globally-based hedge funds investing in both Emerging and Developed markets. The HFRI FWC Index advanced +1.5 percent over the first five months of the year, led by the directional HFRI Equity Hedge (Total) Index, which jumped +3.8 percent in May and +2.7 percent YTD through May.
Other regional and Emerging Markets indices have posted strong YTD gains through May, with the HFRI Japan Index jumping +8.1 percent, the HFRI EM: MENA Index advancing +5.1 percent, and the HFRI EM: China Index gaining +4.5 percent over the first five months of 2025.
Hedge funds with high exposure to cryptocurrency across EM regions including Korea, Russia, China, and the Middle East posted a sharp recovery in the second quarter, as the volatile HFR Cryptocurrency Index surged +15.2 percent in the two-month period covering April and May 2025, though the Index remains down -10.2 percent YTD. As announced previously, HFR launched an expanded strategy classification system for hedge funds and alternative investment products focused on the Cryptocurrency and Blockchain space, with the introduction of 11 innovative, sophisticated and specialized sub-strategies.
Total Emerging Markets hedge funds ended 1Q25 with an estimated $259 billion AUM, the highest level since 4Q21, while total estimated capital invested in Asian hedge funds increased slightly from the prior quarter, ending 1Q25 at an estimated $132.7 billion AUM.
“Emerging markets hedge funds have successfully managed risk between uncertain geopolitical/military conflicts and evolving trade/tariff risk, with wide ranging impacts across energy, trade, currency, technology and equity markets,” stated Kenneth J. Heinz, President of HFR. “Cryptocurrency volatility also surged through mid-2025, with managers navigating dramatic policy shifts and innovative platforms and sovereign initiatives. As these risks not only shift and evolve but converge it is likely that leading global institutions and investors will increase allocations to innovative, sophisticated EM and cryptocurrency hedge funds for specialized access to these powerful trends.”