Brexit boost for emerging market hedge funds

Brexit boost for emerging market hedge funds

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Hedge funds focused on emerging markets have turned in a decent performance so far in 2016, helped by Brexit. 

Stats from Preqin show Latin America-focused funds have generated 11.63% on average so far this year, with Brazil focused funds posting gains of 12.94% year-to-date.

Russia & Eastern Europe focused hedge funds have also enjoyed decent performances with 7.67% gains on average as a result of the strengthening Russian rouble and rising oil prices.

Preqin’s own emerging markets hedge fund benchmark was the top performing regional benchmark in the second quarter and has returned 4.17% so far this year.

“For now, emerging market growth momentum is positive and outflows have come to a standstill,” Maarten-Jan Bakkum, senior emerging markets strategist at NN Investment Partners, said in a note to clients last week.

Strong Chinese housing data and weak US economic data has helped the performance.

The UK’s Brexit vote at the end of June also proved to be a positive factor.

"The Brexit uncertainty was perceived as a specifically European problem and resulted in an improved relative risk profile of emerging markets," Jan Bakkum added. 

However, Preqin data shows the result of the Brexit vote created challenging market conditions for Europe-focused hedge funds which lost 1.47% in June, bringing the full second quarter returns to -0.12%.

Meanwhile macro strategies remain at the top of the league table for 2016 year-to-date, delivering 3.18% in 2016 so far, beating the 1.36% returned by the Preqin All-Strategies Hedge Fund benchmark.

“The performance has not gone unnoticed by institutional investors, Preqin’s report added. “Macro is the second most targeted hedge fund strategy over the next 12 months.”

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