Capital invested in hedge funds focusing on emerging markets fell by around 5% in the volatile first quarter of 2008. Total capital declined from over $115 billion at the end of 2007 to about $110 billion at the end of 1Q 2008, according to Hedge Fund Research.
This is in sharp contrast to recent and longer term asset growth trends in emerging markets hedge funds. Emerging market strategies experienced more than a four-fold increase in assets under management since 2002.
The Latin American region and Africa both proved popular with investors, ending the quarter with a net increase in assets. Russia and Eastern Europe continued to attract capital with investors allocating over $400 million to funds focused on these regions.
The total number of funds investing in emerging markets increased by 30 during the quarter to over 1,050 compared with the last quarter of 2007.
“A combination of factors including expectations for slower developed market growth in the near term, a weaker US dollar and persistent strength in commodities have continued to drive interest in emerging markets focused hedge funds,” says Kenneth Heinz, president of Hedge Fund Research.
“The increase in the number of funds focusing on emerging markets, as well as net inflows of capital into Russia, Eastern Europe and Africa suggest that both hedge fund managers as well as investors continue to find compelling opportunities in these regions,” concludes Heinz.