May 2009
Hedge fund strategies: Developed opportunities in emerging markets
Emerging markets hedge funds returned more than any other strategy in March, producing 4.63%, according to HFR, ending eight months of continuous losses. In 2008, average losses of emerging market hedge funds were nearly 37%, and investors withdrew $6.7 billion from them in the fourth quarter. Total hedge fund capital committed to emerging markets fell to less than $67 billion globally.
Some analysts say March was a one-off for emerging markets, which can only stand to lose more with liquidity dampened, and restrictions imposed on short-selling. But mismatches between fundamentals of developed and developing markets offer investment opportunities. The financial crisis has in fact caused some developed countries to have characteristics of emerging market economies.
Karthik Sankaran is the principal and portfolio manager of emerging markets trading and investment firm Coverpoint Capital Advisors. He says...
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