11/21/2017 Market Commentary

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HFRI China leads hedge fund industry gains, Chinese equities YTD; HFRI MENA Index declines on regional equity weakness
CHICAGO, (November 20, 2017) – Hedge fund capital invested in Emerging Markets (EM) rose to a record to begin 4Q17 with the primary contribution coming from the industry-leading performance of Chinese hedge funds. Total EM hedge fund capital increased to $223 billion (1.48 trillion RMB, 730 billion Brazilian Real, 14.5 trillion Indian Rupee, 13.2 trillion Russian Ruble, and 834 billion Saudi Real), according to the latest HFR Emerging Markets Hedge Fund Industry Report, released today by HFR®, the established global leader in the indexation, analysis and research of the global hedge fund industry. As previously reported by HFR, total hedge fund capital globally increased to a record of $3.15 trillion to begin 4Q17.
Chinese hedge funds have led EM hedge fund performance for 2017, with the HFRI EM: China Index surging +28.1 percent through October, the best performance since 2009, and topping the gain of Chinese equities by over 1700 basis points YTD. Total hedge fund capital invested in Emerging Asia increased by 13.5 percent to $55.2 billion through the first three quarters of the year, while total EM hedge fund capital increased by +10.9 percent; the HFRI Emerging Markets (Total) Index has climbed +15.6 percent through October.
Hedge funds investing in Latin America also posted strong performance gains YTD, with the HFRI EM: Latin America Index advancing +15.5 percent, following a surge of +27.2 percent in 2016. Total EM hedge fund capital invested in Latin America has increased +7.7 percent in 2017 to $6.8 billion. Similarly, the HFRI EM: Russia/Eastern Europe Index has added +8.2 percent YTD, following a jump of +27.0 percent in 2016. Total EM hedge fund capital invested in Russia/Eastern Europe has increased +4.4 percent in 2017 to $30.6 billion.
The HFRI EM: MENA Index fell -1.2 percent in 3Q17 and -1.85 percent in October, paring the YTD return to +4.7 percent. The Index has seen declines of -3.8 and -7.1 percent, respectively, in each of the prior two calendar years. Total EM hedge fund capital invested in MENA increased by +6.7 percent YTD to $4.9 billion.
“Emerging Markets hedge funds extended a strong 2017 into the fourth quarter, as accelerating global trade, restrained inflationary pressures and moderating geopolitical tensions drove gains across regional EM equity markets,” stated Kenneth J. Heinz, President of HFR. “Chinese hedge funds have continued to demonstrate strong outperformance of regional equities through security selection and exposure adjustment, while MENA focused funds continue to navigate regional volatility associated with unpredictable political and commodity adjustments. EM hedge fund performance and growth leadership is likely to extend into 2018 as these trends continue.”