HFR writes that Emerging Markets hedge funds surged in May and posted strong YTD gains through May 2025 as global geopolitical and, specifically, regional Middle East tensions escalated into military conflict, impacting a wide range of energy, shipping and trade.
The HFRI EM: India Index surged +4.5 per cent in May, while the HFRI EM: Latin America Index added +2.1 per cent in May to increase its YTD return to +11.3 per cent, as reported today with the releases of the HFR Asian Hedge Fund Industry Report and the HFR Emerging Markets Hedge Fund Industry Report from HFR.
The HFRI Emerging Markets (Total) Index, which covers all EM regions, advanced +2.2 per cent in May and +4.8 per cent YTD through May, leading the HFRI Fund Weighted Composite Index (FWC), which consists of globally-based hedge funds investing in both Emerging and Developed markets. The HFRI FWC Index advanced +1.5 per cent over the first five months of the year, led by the directional HFRI Equity Hedge (Total) Index, which jumped +3.8 per cent in May and +2.7 per cent YTD through May.
Other regional and Emerging Markets indices have posted strong YTD gains through May, with the HFRI Japan Index jumping +8.1 per cent, the HFRI EM: MENA Index advancing +5.1 per cent, and the HFRI EM: China Index gaining +4.5 per cent over the first five months of 2025.
Hedge funds with high exposure to cryptocurrency across EM regions including Korea, Russia, China, and the Middle East posted a sharp recovery in the second quarter, as the volatile HFR Cryptocurrency Index surged +15.2 per cent in the two-month period covering April and May 2025, though the Index remains down -10.2 per cent YTD. As announced previously, HFR launched an expanded strategy classification system for hedge funds and alternative investment products focused on the Cryptocurrency and Blockchain space, with the introduction of 11 sub-strategies.
Total Emerging Markets hedge funds ended 1Q25 with an estimated USD259 billion AUM, the highest level since 4Q21, while total estimated capital invested in Asian hedge funds increased slightly from the prior quarter, ending 1Q25 at an estimated USD132.7 billion AUM.
“Emerging markets hedge funds have successfully managed risk between uncertain geopolitical/military conflicts and evolving trade/tariff risk, with wide ranging impacts across energy, trade, currency, technology and equity markets,” says Kenneth J. Heinz, President of HFR. “Cryptocurrency volatility also surged through mid-2025, with managers navigating dramatic policy shifts and innovative platforms and sovereign initiatives. As these risks not only shift and evolve but converge it is likely that leading global institutions and investors will increase allocations to innovative, sophisticated EM and cryptocurrency hedge funds for specialised access to these powerful trends.”
