Emerging Market Hedge Funds Rebound But See $197 Mln Q3 Outflow

Emerging market hedge funds reversed their September losses with a strong October, but investors remain skittish about allocating fresh capital because of a highly volatile marketplace, a report by Hedge Fund Research Inc. contends.

The HFRX Total Emerging Markets Index climbed nearly 4 percent in October after plunging 5 percent in September, the worst month this year for the global hedge fund industry. But emerging markets weren't immune to the volatility that has played out in dramatic fashion across the globe, and as a result, the sector saw a third-quarter outflow of $197 million, HFR said.

The firm added that investors reduced their capital in equity hedge and macro funds, but increased holdings in event driven and relative value funds based within emerging markets. During the quarter $145 million flowed into funds that invest across multiple emerging markets, HFR reported.

Volatility impacted Latin American and Russian hedge funds the most this year, HFR added. The HFRX Latin America Index gained 5.2 percent in October following an 8.5 percent decline in September. But for the year that index is down nearly 7 percent, HFR said.

Meanwhile the HFRX Russia/Eastern Europe Index rose 5.5 percent in October following a 7.5 percent dip in September. But for the year HFR said it's down 11 percent.

As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced Trading in 2010, Grant's news analysis has touched on everything from the latest ... View Full Bio