Hedge funds in Asia seeing reversal with deepened worries about global slowdown

NEW YORK: Hedge funds in Asia, which beat counterparts in the US and Europe in 2015, are off to their worst annual start on record this year, as the region’s stock markets have plunged amid a dimming outlook for growth.

Asia hedge funds, excluding those that invest in Japan, fell 1.5% in February, bringing their loss for the first two months of 2016 to 6.6%, according to Singapore-based data provider Eurekahedge. Apart from being the biggest drop ever for the first two months of the year, that’s also the worst start among the world’s major regions, Eurekahedge said. Hedge funds, including those from Greenwoods Asset Management and Zeal Asset Management extended declines they suffered in January.

After successfully navigating turbulent markets in 2015, hedge funds in Asia are seeing a reversal this year as worries about a global slowdown have deepened. The Shanghai Composite Index has tumbled 19% this year to rank among the worst-performing equity markets in the world, and most of the region’s benchmarks have been whipsawed by volatility amid scant signs of global growth.

“Hedge fund managers in the region, especially those focusing on long-short strategies, had been stung by volatility in underlying markets,” said Mohammad Hassan, a Singapore-based senior analyst at Eurekahedge.

As it becomes more difficult to post consistent returns, investors are increasingly shifting their money to the largest or most promising managers, prompting many smaller-scale firms to exit the business or return money to investors. That’s creating a bifurcation in Asia’s hedge fund industry.

The losses for hedge funds investing in Asia ex-Japan compares with a decline of 3.2% in Europe through the end of February and a decrease of 1.7% in North America, according to the Eurekahedge website. Last year, Asia ex-Japan hedge funds rose 7.5%, beating rivals in other parts of the world. Greenwoods Asset’s Golden China Fund fell 3.7% in February, bringing its losses to 14.4% so far this year.