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Global Hedge Funds Find Success in Emerging Markets: Report

Kerima Greene|Senior Talent Producer, CNBC’s Power Lunch 

Global hedge fund assets are off to a fairly good start this year, according to new data.

Alex Williamson | Ikon Images | Getty Images

The industry now has $2.01 trillion in assets under management, according to Deutsche Bank's February 2012 Monthly Hedge Fund Trends Report, with the typical median fund up 1.52 percent since the beginning of the year.

Barry Bausano, Deutsche Bank's co-head of global prime finance and head of equities America, says the biggest hedge managers are having the most success in emerging markets, particulary in Brazil, Russia, India and China — a collection of markets known as the BRICs .

"Emerging markets are the growth space,” says Brausano, noting that many of those markets have seen impressive rallies, including Brazil and India which are up 25 percent in terms of local currency.

“You can deploy capital effectively [there]," he adds.

In addition, Bausano says investors continue to focus on selecting good managers, as opposed to adding or reducing tactically from a specific strategy.

The Global Prime Finance study also finds that dispersion between managers of the same strategy remains high when compared to historical averages.

This trend persisted in January, where a handful of managers caught the rebound in the global markets. Others were positioned too conservatively to benefit from it.

Highlights from the hedge fund report.

Highlights of the report:

  • Investor sentiment

"Review of 2011 — Global hedge fund assets under management rebounded to US $2.01 trillion by the end of 2011, even though we saw minor outflows in the final quarter. Total flows into the industry for the year was around US $70 billion, a healthy increase from the inflows of US $55 billion we saw in 2010.

Most of the flows went to a handful of well established managers. Focus on manager selection, not tactical calls Generating returns in 2011 was challenging, but hedge funds protected investor capital and investor commitment to the asset class remains strong. Given macro uncertainty, investors continue to focus on selecting good managers, as opposed to adding or reducing tactically from a specific strategy."

  • Performance

"All strategies globally performed positively except for US managed CTA and Asian Macro which were roughly flat on the month. Equity strategies led the way in all regions with Emerging Markets heading the pack. January witnessed an unusually high dispersion of returns as the strength of the market rally caught many hedge funds by surprise, having positioned themselves defensively at the start of the year."

  • Leverage

"Volatility dropped significantly by 54.61 percent this month, ending January at 10.57. Gross and net exposures were up 6 percent and 9.30 percent respectively, ending January at 2.30 and 0.58."


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