Global HF assets slip 8.5% to $1.67 Trln in 1H 2009

Date: Monday, October 5, 2009
Author: Hedge Fund Journal

Assets in global hedge funds slipped a further 8.5% during the first half of 2009 to reach $1.67 trillion by July, according to new research by HedgeFund Intelligence.

In the second quarter, HFI said it became increasingly clear that the rate of decline was slowing and that over the summer the massive trend of net outflows petered out and probably began to reverse. It noted that many major fund groups have been reporting higher asset figures in the past two months due to both strong performance and/or renewed net inflows.

“Following a period of strong performance during the third quarter and plenty of anecdotal evidence that the majority of funds have begun to see net inflows again, we would not be surprised to see industry assets rise from the midyear levels by at least 10% before the end of 2009,” said Neil Wilson, editorial director at HedgeFund Intelligence.

The drop during the first half of the year continued a decline that had begun during 2008, when there had been a particularly steep fall during the second half of the year. From a peak figure of almost $2.7 trillion reached during the first half of 2008, global hedge fund assets have now fallen by some 38%.

During the second half of 2008, in the midst of the global financial crisis, the fall in industry assets had been hastened by widespread negative performance – which, along with net redemptions, had also accounted for a substantial proportion of the overall decline. In the first half of this year, however, performance was generally robust, with a median return from hedge funds globally of over 5%. This implies that net redemptions from hedge funds were continuing at a fairly rapid rate between January and June – with as much as 15% of investor money being pulled from the industry during the first half, and the further overall decline only partially offset by positive performance.

During the first half, there was a further trimming down in the ranks of the bigger firms in the industry – with the number of firms that run hedge fund assets of $1 billion or more slipping further from 395 in the first half of 2008 to 311 at the beginning of 2009 and now to 291 at the mid-year point (de-duplicating for related groups which run funds from more than one centre). The combined assets of these ‘billion dollar club’ firms also shrank further – from $1.46 trillion in January to $1.37 trillion by July.

New York remains by some distance the top global centre for hedge funds, though its total number of billion dollar firms slipped a little, from 123 to 118, during the first half, its share of assets remained almost unchanged at nearly 47%. London is still comfortably the second biggest centre, but its number of billion dollar firms dropped more steeply in the first half – from 65 to 55, as several UK-based firms slipped below the $1 billion mark. London’s share of the global billion dollar club’s total assets thus slipped from over 17% to under 15%.

Connecticut is still in third place, with a share of assets slightly up at nearly 10.5%. The figures for other global hedge fund centres were largely unchanged, with centres on the increase this year including Hong Kong and Singapore.