Emerging markets are delivering superior returns thanks to blockchain, cryptocurrency, and currencies

Emerging markets continue to outperform U.S. equities in 2019. According to Hedge Fund Research (HFR), assets under management at emerging market hedge funds hit a record $ 239.3 billion at the end of Q2 2019.

This category of hedge funds also reported the best year to date returns in the industry.

Solid returns despite negative factors

These returns at EM hedge funds came despite negative macroeconomic factors such as trade, the devaluation of the Chinese currency renminbi, Hong Kong protests, geopolitical strife in the Middle East, and falling global yields.

However, EM hedge funds gained from positions in blockchain, cryptocurrency, and currencies. Of note, is the 65% year to date surge in the HFR Blockchain Index, despite a 17.2% correction in July.

To put EM returns in perspective, the HFRI Fund Weighted Composite Index, a benchmark of global hedge fund performance, gained 7.8% year to date through July. In comparison, the HFRI EM (Total) Index returned 8.6% in the same period.

Top-performing markets

According to HFR, Russia and Eastern Europe advanced 15.9% year to date in July. Meanwhile, Latin America surged 14.5% and China gained 13%. The Middle East and North Africa region rose 5.5%.

The performance comes at a time that hedge fund investors in the U.S. are heading for the exits.