Emerging market hedge funds pull in $9 bln in '07

By Svea Herbst-Bayliss

BOSTON, Feb 11 (Reuters) - Hedge funds specializing in emerging markets took in $9 billion in new money last year as strong performance at portfolios focusing on Russia, Africa and the Middle East wooed investors, data released on Monday show.

However, some industry experts say that trend may be interrupted after these portfolios, which scored strong returns in 2007, ranked among the worst performers in January 2008.

According to data from Hedge Fund Research, a firm that tracks flows and performance, last year's flows helped boost assets in emerging market hedge funds to $110 billion.

The world's roughly 950 million hedge funds that specialize in emerging markets still manage only a small portion of the $1.87 trillion managed by all hedge funds, but demand for these specialized funds has picked up in recent years.

Since 2002, total emerging market hedge fund assets have increased nearly five-fold with investors adding only $3.3 billion in new money in 2003.

Part of the newfound allure has been directly related to their strong performance, analysts said. Last year, emerging market funds returned 25.03 percent on average, HFR data show, far better than the average hedge fund, which was up about 11 percent.

That number was fueled by eye-popping returns at funds like the GLG Emerging Markets Fund which surged 50.50 percent, the Kazimir Russia Growth fund which gained 48.77 percent, and the Moore Emerging Market Fund's 45.62 percent increase, people familiar with their numbers said.

Hedge funds are loosely regulated and are therefore not required to report flow or performance data to anyone, which prompts investors to watch all information on how much funds take in and how individual funds perform closely.