Hedge Funds Record Sizable Losses In Emerging Markets

Emerging markets-focused hedge funds reported sizable losses in the wake of the sharp drop in the Shanghai Composite Index and the surprise devaluation of the yuan, bringing their three-month drawdown to 9.2%, according to Hedge Fund Research on Friday. Hedge fund capital invested in emerging markets dropped to $185 billion at the end of August from $198 billion in mid-2015, said HFR. Emerging-market losses were led by the HFRI China Index, which fell 7.55% in August for a three-month drop of 18.5%. "Emerging market hedge funds experienced extreme volatility in recent months not only as a function of regional equity and local currency liquidity pressures, but also because of intense structural pressure from local market regulators and government agencies," said Kenneth Heinz, president of HFR, in a statement.