The estimated net assets of the global hedge fund industry rose by 6 per cent in the final quarter of 2006 and grew by 24 per cent over the year as a whole to reach USD1.89trn, according to Hedge Fund Asset Flows & Trends Report 2006-2007, released by Institutional Investor News and HedgeFund.net.
Hedgefund.net estimates total hedge fund asset levels rose in the final three months of 2006 from USD1.79trn to USD1.89trn, the second largest quarterly increase since the first quarter of 2005. According to the report, total hedge fund assets stood at USD1.53trn at the end of 2005.
The report says that fund of funds assets continued to increase at a steady pace of 22 per cent last year, with growth of USD174bn taking the total to USD953bn. New allocations accounted for an estimated USD125.7bn of the asset growth, while performance added an additional USD48bn.
Europe continued to be the fastest growing major investment region for most hedge funds, the report says. Total assets in funds that invest primarily in European markets increased at a rate of 46 per cent in 2006, reaching a year-end total of USD276.5bn.
Equity-focused hedge fund assets rose by 30 per cent to USD743bn in 2006, an increase of USD173bn, with new assets accounting for 69 per cent of the growth. In the fourth quarter the assets of equity-focused funds rose 8.3 per cent, in Q4 2006, the second highest increase since the first quarter of 2005.
Despite a mid-year blip in performance, the report says, emerging market fund assets increased by 41.4 per cent during 2006, from USD123.4bn to USD174.5bn, with new allocations accounting for USD22.9bn.
Emerging market equity-focused fund assets increased 58 per cent last year while emerging market debt-focused fund assets grew by 23.3 per cent. The assets of energy sector-focused funds grew by 52 per cent to USD79.3bn, with new allocations representing USD18.2bn of the USD27bn increase.