GLOBAL - Emerging markets and particularly Chinese portfolios fuelled hedge fund performance in the second quarter of 2007, according to new Morningstar data.
The research provider said China hedge funds produced strong performance, recovering from the market setback in late February.
Solid energy markets in Russia and Brazil also bolstered returns for many emerging-markets funds.
In terms of overall performance, Morningstar said hedge funds returned an average of 5.25% in the second quarter, beating the first quarter performance of 2.1%.
Nevertheless, analysts said hedge funds slightly underperformed the S&P 500, which returned 5.81% in the second quarter despite its loss in June.
Hedge fund performance was also edged out by the MSCI World Index which delivered a return of 5.82%.
These figures could have serious implications for institutional investors as a recent report by Private Equity Intelligence (Prequin) forecast a total of US$85bn in new institutional assets would be allocated into hedge funds in the next two years.
The Preqin Hedge Special Report said as institutional investors worldwide have been increasing their allocations to alternatives, the hedge fund industry had been receiving more backing from investors than at any other point in the history of the asset class.
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