New Hedge Fund Launches Up 34%
Monday, April 25, 2011

The single-manager hedge fund industry recovered in 2010 with assets under management (AUM) increasing 11% over 2009 to USD1.6 trillion and 1,184 new funds launching representing a 34% increase over the prior year, according to new research by PerTrac.

PerTrac's latest study, 'Sizing The 2010 Hedge Fund Universe', drawn from 10 leading global databases, finds that total AUM for single-manager hedge funds and fund of funds was USD2.1 trillion in 2010. However, Fund of funds continue to see AUM decline, as evidenced by other recent studies on hedge fund assets. The 3,196 fund of funds in the study – approximately the same number as in 2008 – had USD518bn under management in 2010. This represents a 10.5% decrease from 2009 and a steep 31% decline from 2008 when USD750bn was reported.

Commodity Trading Advisors (CTAs), the third category measured in the study, attracted investors in 2009 as a haven from stocks and bonds as their numbers peaked that year at 2,425. In 2010, the number of CTAs dropped to 1,997 which is approximately the same level as in 2008.

“As we look across the fund universe, one clear area of growth has been in the number of single-manager hedge funds, and we see that momentum continuing in the future,” said Lisa Corvese, Managing Director, Global Business Strategy at PerTrac. “Overall, the study demonstrates a rebound, with the industry as a whole getting closer to prior peaks.”

The PerTrac study of hedge funds aggregates information from 10 leading global databases,

Other key findings in the PerTrac study, which has been conducted annually since 2003, show that:

• There are 9,572 single-manager hedge funds;
• Almost half (3,763) of the reporting single-manager funds have less than USD25m in AUM;
• Single-manager funds are growing in AUM with 73% reporting less than USD100m in AUM in 2010 compared to 79% in 2009;
• Most fund of funds are small with just 108 (3.3%) reporting AUM of greater than USD1bn and 70% reporting less than USD100m AUM and almost 42% reporting less than USD25m AUM.
• Approximately 47% of all funds report to only one database which means investors need to use more than one database to ensure they have complete information on single-manager funds.

In terms of performance, hedge funds as measured by the Dow Jones Credit Suisse Hedge Fund Index put in another month of positive performance in March, with the index rising by 0.12%, according to data released by the firms on April 20.

Five out of ten strategies in the index posted positive performance for the month, with Emerging Markets the best-performing sector, returning 2.12%. Despite early losses following the market's reaction to the events in Japan, Equity Market Neutral managers finished the month up 1.11%. Global Macro managers also posted positive performance (0.15%) for the month. This, according to Credit Suisse/Dow Jones was as a result of market dislocation following the event in Japan which created a number of shorter-term tactical trading opportunities.

Hedge funds as measured by the Barclay Hedge Fund Index gained 0.35% during March, with 11 of the firm's 18 sub-indices recording gains. Here, too, Emerging Markets led the way with a 2.3% gain. Short equity strategies suffered losses last month however, with the Equity Short Bias Index falling 1.85%.

The events in Japan also hit Managed Futures programmes, with the Barclay CTA Index falling 0.91% in March, dragging year-to-date returns down to a negative 0.39%.

“Perilous crosscurrents wrought by devastation in Japan, unrest in the Middle East, and higher headline inflation generated turmoil in futures markets,” says Sol Waksman, founder and president of BarclayHedge. “The fallout from mid-month trend reversals in capital and commodity markets hit diversified trend followers harder than other sectors.”