Total assets for the hedge fund industry grew by 3.34 percent in the third quarter to USD 687.5 billion based upon an estimate of 5,735 hedge funds in the industry according to a new report from Hedge Fund Research (HFR), Inc.
HFR, the Chicago-based producer of hedge fund information and performance data, this week released its Quarterly Industry Report for the third quarter of 2003.
Joshua Rosenberg, President, HFR, Inc. said: "Year-over-year, the industry has continued to gain net new assets, with total inflows totaling approximately USD 54 billion on a trailing 12-month basis. The fund of funds sector has proven to be the single most attractive category to investors, posting positive inflows for both the quarter and the trailing 12 months."
As detailed in the report, hedge fund industry assets under management again hit new highs in Q3 2003, with strong investment performance overcoming a moderate 5.5 billion in net outflows. Year-to-date, hedge fund industry assets are up 10.47 percent.
Third quarter growth was due primarily to a broad-based performance rally reflected in the strong 4.32 percent return of the HFRI Fund-Weighted Composite Index. Top performing categories for the period included HFRI Emerging Markets Index, which gained 10.28 percent; HFRI Equity Hedge Index, with 5.50 percent growth; and HFRI Macro Index, up 5.38 percent.
Among other findings in the HFR report:
* Fund of Funds sector now controls USD 225.2 billion worth of hedge fund assets, or roughly 33 percent of industry assets. FOFs experienced a net inflow of roughly USD 4.4 billion.
* Equity Hedge products, which house an estimated USD 214 billion, or 31 percent of all industry assets, returned 5.5 percent during the third quarter, according to the HFRI Equity Hedge Index.
* Other strong categories on the quarter included the HFRI Distressed Index which gained 5.88 percent and the HFRI Equity Non-Hedge Index which was up 7.08 percent.
* Not surprisingly, short-sellers were net losers during a quarter that saw the Standard & Poor's 500 post a gain of 2.3. Accordingly, the HFRI Short Selling Index was down 5.3 percent.
* The USD 68 billion Macro fund category, which comprises 9.9 percent of total hedge fund assets, accounted for nearly half of total outflows.
* Industry inflows were led by the Even-Driven and Convertible Arbitrage categories. Perhaps as a result of anticipated M&A activity, Merger Arbitrage saw more than USD 703 million in new funds in the third quarter, a sizable 5.8 percent sequential increase for the USD 12.1 billion category.
The HFR report tracks performance in 19 separate fund categories ranging in size from the USD 214 billion Equity Hedge category, which includes funds investing in long equities hedged with short sales of stocks and/or stock index options, to the USD 878 million Regulation D category, which includes funds that invest in privately offered structured discount convertibles.
The HFR 3Q 2003 Industry Report contains more than 100 pages of charts and graphs provided in both PowerPoint and Adobe Acrobat formats.
Background Note: Chicago-based HFR Group L.L.C, founded in 1993, is one of the global leaders in hedge fund data, research, indexation and asset management. The HFR Group companies include Hedge Fund Research, Inc., and HFR Asset Management L.L.C. Hedge Fund Research produces HFR Database, considered to be the definitive source of hedge fund performance and information. HFR also distributes the HFRI Monthly Performance Indices-the premier benchmarks for the hedge fund industry. For more information on the HFRI Indices, visit www.hedgefundresearch.com .
copyright hedgeweek 2003