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Hedge fund assets jump to $2,900bn

Date: Monday, June 9, 2008
Author: James Mackintosh, Financial Times

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Hedge funds have more than $2,900bn under management, according to a survey of valuers of their assets, sharply up on last year in spite of the credit crunch and a series of high-profile problems in the industry.

The survey of assets under administration by Hedge Fund Manager Week, a trade magazine, showed the total had jumped 20 per cent in the past year and continued to climb over the past six months even as the credit squeeze intensified.

The scale of the growth - up by $230bn in the six months to April - suggests concerns about hedge fund losses and a slowdown in flows of new money into the industry may be overstated.

However, the rate of growth is slowing, with the 9 per cent rise in the most recent six months well below the 17 per cent growth in the magazine's last survey.

Hedge fund administrators act as independent valuers of hedge fund assets, giving investors updates and providing regulatory, legal and accounting services.

They are used by almost all European hedge funds and an increasing number of US funds, who are under pressure from investors to provide independent valuations.

Valuation practices are being closely scrutinised by regulators, with hedge funds in the UK and US setting up codes of best practice this year, with a focus on how to deal with hard-to-value assets such as private equity or structured credit.

There was little change in the ranking of the top administrators, with Citco Fund Services again the biggest, after increasing assets under administration by 24 per cent to $482bn in the year to April.

Citadel Solutions, the year-old administration arm of Chicago-based hedge fund Citadel Investment Group, grew assets 73 per cent to $24.4bn, ranking it as the 23rd largest administrator.