New York (HedgeCo.net) – The Chinese stock market continued to move sharply higher in April and hedge funds that focus on investments in the country continue to reap the benefits. The Shanghai Composite Index rose 18.51% during the month of April and it was up 37.31% YTD through the end of April.

With that kind of performance, it would be hard for hedge funds not to show impressive numbers. The latest report from the AsiaHedge Chinese Long/Short Equity Index gained 16.58% in April and that is the biggest monthly gain since March 2001 when the index gained 23.77%. According to an article from CNBC, the average Chinese hedge fund is now up 23.25% YTD through the end of April.

While the numbers are impressive, we should also point out something that we have tried to reiterate over the past few months. The hedge fund index has lagged the overall market during this incredible run for the Chinese market. Once again that is due to the hedging aspect of the funds. When a market is going straight up like the Chinese stock market has for the past year, any portfolio that is hedged or protected with bearish positions is bound to lag a roaring bull market. However, when the Chinese market experiences a downturn, the hedged portfolios should outperform the overall market.

Rick Pendergraft
Research Analyst
HedgeCoVest