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China-focused hedge funds are back in the black

By NexChange
Hedge Funds

China Dragon Fangs Claws Rarr

The Shanghai Composite’s roller coaster performance may have obliterated hundreds of hedge funds, but according to eVestment’s latest Hedge Fund Performance report, those who managed to hold on are now firmly in the green:

“China-focused funds’ 6.48% increase in October brought YTD returns firmly into positive territory for the year, 6.02%. The apparent defensive positioning which helped the universe avoid the severity of the country’s equity market losses in prior months caused the group to miss the majority of October’s large rally, however the universe still holds a significant edge YTD. The S&P China BMI remains in negative territory in 2015, despite October’s 12.47% increase.”

This is great news for Hong Kong, whose predominantly China-centric firms widely outgunned their North American, European, and even their mainland-domiciled peers year to date:

“Products operating out of Hong Kong have outperformed all other regional and country specific fund domiciles in 2015, primarily due to the predominance of China-focused products. The universe has widely outperformed China domiciled products, which in turn have still outperformed Chinese equities.”

Aggregate hedge fund performance however has been pretty dismal compared to the S&P, with the former returning just 1.94% in October while the latter posted an impressive 8.44% return. In fact, not even a single strategy, market, or region focus came close to it, and it only becomes worse if you factor in the SHCOMP’s staggering 10.54% rise in the same time period.

Nevertheless, China, Japan, and Russia funds beat the SPX quite handily YTD, returning 6.02%, 5.98%, and 15.27% respectively, so it wasn’t all that bad for the industry.

Photo: Jim Winstead

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