Emerging Markets hedge funds carried their year-end surge into 2024, buoyed by expectations of falling inflation and interest rates and a stronger global economy.
The recent gains were powered by exposure to evolving AI and cryptocurrency trends, according to a report by hedge fund analyst HFR. Hedge funds heavily invested in cryptocurrency across emerging markets saw significant growth, with the HFR Cryptocurrency Index rising by +25.6% YTD through February.
Hedge funds adapt to geopolitical strain, embrace fixed income in 2024
The HFRI Emerging Markets: Global Index rose by +3.5% YTD through February, with the HFRI EM: China Index surging by +4.2% in February. The HFRI Japan Index led Asian-focused indices, up by +5.3% in the first two months of 2024.
Overall, emerging markets and Asian hedge fund assets increased, reaching their highest levels since Q2 2022. Regional emerging markets indices also saw gains, with the HFRI EM: MENA Index up by +1.05% YTD through February and the HFRI EM: Latin America Index gaining +0.3% YTD.
“Asian and emerging markets hedge funds posted strong gains in 2023 and early 2024, driven by an improving global outlook and strong tailwind from cryptocurrency and AI technology exposures, extending the powerful risk-on sentiment driven by surprise declines in inflation and interest rates,” stated Kenneth J. Heinz, president of HFR.
Research finds investors plan higher allocations to alternative credit
“These gains have occurred despite ongoing geopolitical risks, including potential for dislocations or disruptions in energy, commodity and supply chain markets,” he added.
Global institutions and investors are expected to boost allocations to specialised emerging markets and cryptocurrency hedge funds in 2024, attracted by their resilience amidst ongoing volatility, he predicted.
