Hedge Fund Industry Estimate: 11th Largest Economy In the World?

Date: Friday, December 7, 2007
Author: Christopher Holt, SeekingAlpha.com

Last week, we reviewed a series of estimates for the size of the global hedge fund industry that pegged it anywhere between $1.25 trillion and $2.68 trillion, a range of error that, if it were an annual GDP figure, would rank as the 11th largest economy in the world.

Now, we add two new estimates to the list. In their latest quarterly journal, McKinsey says the world’s hedge funds manage approximately $1.8 trillion…

Russell also came out with a new estimate with the release of its annual survey of alternative investments. Said the survey’s press release:

Institutional respondents around the globe predict that their strategic allocations to hedge funds will increase by 2009, except in Australia where the hedge fund allocation is anticipated to remain steady at 4.1 percent. European respondents expect allocations to hedge funds to rise from 7.4 percent to 8.4 percent while Japanese respondents predict it will increase from 9.3 percent to 9.9 percent. The biggest jump is expected in North America, where allocations to hedge funds are forecast to rise from 7.5 percent to 8.9 percent over the next two years.

Some readers may note that Russell finds European institutions currently invest 7.4% of their assets in hedged funds while JP Morgan’s recent survey of European institutions suggested that only 5% currently invested in hedge funds (see related posting). So, as with global figures, the best bet may be to just pick an average from the myriad of differeing estimates available.