Hedge funds specializing in emerging markets investments are on track to produce their worst aggregate annual return in seven years, data released Wednesday by Hedge Fund Research showed.
The average return of the 1,156 emerging market hedge funds in the HFRI Emerging Markets (Total) index was -10.7% year-to-date through Oct. 31. HFR researchers, in the index producer's latest report, said that is "on pace for the worst calendar year of performance since declining 14% in 2011."
The index's 3.7% decline in October is the worst monthly return since January 2016 when the index was down 5.4%.
HFR also reported that redemptions in the quarter ended Sept. 30 totaled $3.1 billion, the largest quarterly redemption since the first quarter 2009 when investors pulled $6.4 billion from emerging market hedge funds.
In total, EM hedge fund assets fell $3.9 billion, including performance losses, in the third quarter to $227 billion, a 1.7% decline compared to the quarter ended June 30.
"After navigating the falling emerging markets currency weakness in early 3Q, volatility in EM hedge funds spiked in recent months as regional equity market losses in both emerging and developed markets accelerated," said Kennth J. Heinz, HFR's president, in the report accompanying the data.
"Regional EM equity market developments, including ongoing Brexit and U.S. trade negotiations, are expected to remain both volatile and fluid through year end, with regionally specialized EM hedge funds positioning to generate performance both long and short from the opportunities and volatility," Mr. Heinz added.