Latin American Funds
Latin American Funds Remain StrongHere is a guest article by Naveen Kumar on hedge funds in Latin America and Brazil.
The HFN Latin American Average (LatAM) was launched in early 2007 and since then it’s exhibited tremendous growth. The benchmark has increased by almost 30%, blowing away every strategy specific HFN benchmark. Only the HFN benchmarks for Brazil, Middle East, North America, and China have outperformed the LatAM index.
This tremendous growth can be attributed to the large increase of investments in the region’s equity markets. To give you a sense of this, out of the 115 composite funds, 46 focus solely on equities. This is 24 more than in December of 2006. Many of the funds in LatAM focus solely on Brazil, a country whose own benchmark has risen 40%. Luckily funds invested in Brazil have been sheltered from the recent damage as a result of the weakened global prospects suffered by funds invested in India and China.
Total assets for funds invested in Latin America rose quickly in Q1 2008 to a little over $21 billion. This represents a nearly 30% rise in assets in this quarter alone. Rebounding from a slow period between 2004 and 2006, assets between 2007 and 2008 showed an increase of $14.5 billion. Most of this growth was due to new allocations and not simply performance gains.
One point of potential concern is that a rapid influx of capital to a country’s hedge funds is sometimes followed by a drop of in the country’s equity market. This happened in Russia, India, and China and resulted in a fall of assets. In the long term, however, growth prospects look to remain strong.
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