London, 1 October 2012 - Despite a period of lacklustre returns, assets in global hedge funds continued to edge up during the first half of 2012, according to the latest research from HedgeFund Intelligence.
Assets in hedge funds of traditional types, which are mostly domiciled offshore or structured as limited partnerships in the US, managed total combined assets of $2.147 trillion (including where they have parallel onshore versions) at the mid-point of 2012, up about 4% from the figure of $2.059 trillion at the end of 2011. If other hedge funds in standalone onshore European UCITS structures (with no parallel offshore versions) are added, the total reaches $2.245 trillion, up from $2.156 trillion at the end of last year.
The latest statistics on assets follow a period in which hedge fund returns have returned to positive territory – after a period of losses in 2011. However, they have generally lagged the performance of major equity indices including the S&P500 and MSCI World for most of the year so far.
Despite lacklustre returns, the industry is continuing its steady if slow recovery from the savage drop in size that occurred during the second half of 2008, when a flood of redemptions accompanied by substantial negative returns during the financial crisis saw assets drop by nearly a third from a peak of $2.65 trillion at the end of 2007 to only $1.83 trillion a year later.
In 2009 and 2010 the recovery was led largely by performance, with returns rebounding strongly after the trauma of 2008. And in 2011, assets kept rising – as investors continued to allocate more money to hedge funds despite the fact that average performance went negative again for the second year in the last four. Unlike 2008, last year’s disappointing returns were not accompanied by a further wave of redemptions – a pattern that seems to have been continuing through the first half of 2012.
The industry continues to be dominated by funds managed in the Americas – and it was the American funds that have accounted for the lion’s share of the increase in assets so far this year, with the total for hedge funds in the US up again from $1.470 trillion to over $1.542 trillion during the first half of the year.
In Europe, by contrast, where the industry’s outlook has been blighted to some extent by the ongoing Eurozone debt crisis, assets were barely changed at $423 billion; and in Asia, assets were up only slightly to $144 billion.
Commenting on the latest figures, HedgeFund Intelligence managing editor Neil Wilson said: “Hedge funds have sold themselves very successfully on the basis that they can outperform over the cycle, and do so with lesser volatility than equities. But their ability to achieve those aims will be under more scrutiny than ever over the next year or so.”
He added: “Hedge funds have of course underperformed before during strong bull market periods in equities, and – for the time being at least – most investors seem to remain firmly committed to their hedge fund investments.”
Billion Dollar Club grows
Collectively, the number of firms that belong to the Billion Dollar Club (those firms which manage hedge fund assets of $1 billion or more) expanded significantly in the first half of 2012 – from 340 at the beginning of the year to 364 at the mid-year point, and with more firms in the Club it was not surprising that their total assets managed was also rising, from $1.763 trillion to $1.848 trillion. That continues a trend going back over several years whereby the bigger players have gradually become more dominant, now accounting for around 86% of the industry’s assets.
Most of the new entrants to the Club this year have been in the US, where the number of members in New York for instance has jumped from 139 to 153, with collective assets rising from $751 billion to just over $800 billion.
The number of Club members headquartered in London slipped by one to 56, though collective assets were not much changed at $255 billion. A number of the bigger groups in London continued to grow, and there are now no fewer than seven of the top ten firms that have significant operations in London.
After growing steadily in recent years, Asia’s representation in the Club slipped back in the first half, with the number of members in Hong Kong down from 13 to 11 and in Singapore down from 8 to 7. But the number in Brazil rose from 3 to 4 (including three in Rio de Janeiro and one in Sao Paulo) now with collective assets of over $20 billion.
Full details on the breakdown of industry assets, including all the numbers on the Global Billion Dollar Club (all the 364 firms which run current hedge fund assets of $1 billion or more) are published in the Autumn edition of the HedgeFund Intelligence Global Review.
The figures shown here are for single-manager hedge funds only. They do not include or double-count money allocated to hedge funds via funds of funds. Assets in funds of hedge funds are tracked separately by InvestHedge.
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HedgeFund Intelligence is the leading provider of news, analysis and performance data on the global hedge fund industry. The company provides dedicated information on US, European, Asian and African single-manager hedge funds as well as on hedge fund investors worldwide.
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Del Jones / Toby Bates, Merlin PR