Assets under management in hedge funds worldwide rose to USD2.6trn during 2007, despite the impact of the credit crunch on investor appetites in the second half of the year, according to r
Assets under management in hedge funds worldwide rose to USD2.6trn during 2007, despite the impact of the credit crunch on investor appetites in the second half of the year, according to research by newsletter, magazine and database publisher HedgeFund Intelligence.
The survey, based on HFI’s database of more than 5,000 single-manager hedge funds, indicates that industry assets grew 27 per cent last year from USD2.08trn at the end of December 2006. After assets reached USD2.48trn at the end of June, growth slowed to 6.6 per cent in the second half of the year.
The survey also found that new asset gathering continued to drive industry growth. With hedge funds on average returning about 8 per cent in 2007, more than two-thirds of the increase in aggregate assets under management was down to net inflows of new money from investors.
There are now more than 390 firms around the world managing hedge fund assets in excess of USD1bn. Their combined assets reached USD2.09trn by the end of last year, close to 80 per cent of the industry’s overall total.
HFI says New York is extending its lead as the world’s top hedge fund centre, with 144 billion-dollar-plus managers running USD973bn in collective assets, up from 123 firms with USD1bn or more and combined assets of just under USD650bn at the end of 2006.
In total 255 of the managers with more than USD1bn in assets are based in the US, including 32 in California, 30 in Connecticut, 11 each in Massachusetts and Texas, six in New Jersey and five in Illinois.
At 25 per cent, the growth rate of the industry in Europe was roughly in line with the global increase as total European hedge fund assets rose from USD460bn to nearly USD575bn. London remains the dominant European centre with 75 firms managing more than USD1bn, up from 72 a year earlier, while their collective assets grew from USD261bn to USD348bn. The next largest European centre, Paris, has just six billion-dollar funds with USD19.8bn of assets between them.
As in the US, the biggest firms in Europe are becoming more dominant. The market share of the top 22 firms, each with assets of more than USD5bn each, rose from 37 to 44 per cent of the continent’s hedge fund assets during the year.
The assets in Asia-Pacific hedge funds rose by more than 30 per cent, a slightly faster rate than the global average, from about USD148bn at the beginning of 2007 to a revised figure of USD196bn. However, the figures mask contrasting trends within the region, with huge growth in markets such as China and India alongside significant net outflows from funds in Japan.
As the importance of Tokyo as a hedge fund centre declined, there was particularly strong growth in both Hong Kong and Singapore, which now boast a total of 19 firms with more than USD1bn in assets between them.
According to HFI publication InvestHedge, which tracks investors in hedge funds, a high proportion of the new money coming into the industry is from institutional investors – and a lot of it via funds of funds. There are now 151 fund of hedge funds managers with more than USD1bn each in assets, with an aggregate total of more than USD1.1trn. Including the assets of more than 400 smaller fund of funds managers in the InvestHedge database, close to 50 per cent of industry assets are being allocated via funds of funds.
‘The continued growth of global assets during the second half of last year, albeit at a slower pace than before, shows that hedge funds generally did a pretty good job negotiating the first phase of the global credit crunch,’ says HedgeFund Intelligence editorial director Neil Wilson. ‘Conditions since the start of 2008 have if anything been even more difficult, so it remains to be seen whether hedge funds in general can continue to do such a good job.’
