Hedge Fund assets shoot back to pre-crisis levels

Date: Thursday, March 4, 2010
Author: Hedgetracker.com

The Hennessee Group LLC has released its latest hedge fund update, concluding that the hedge fund industry has begun to rebuild its assets, increasing by over $750 billion in 2009. The +62% increase from one year ago, contrasts with the 20% decline in 2008 The asset flows “leaves industry assets at their pre-crisis levels in 2007,” according to Hennessee’s report. The Hennessee Hedge Fund Index, an “equally weighted average of the funds in the Hennessee Hedge Fund Indices,” gained +24.6% last year, the best yearly gain since 1999.

Hennessee Co-Founder Charles Gradante commented, “New assets are coming from the traditional long-only side; in part due to the horrendous losses in 2008 coupled with an improved comfort level with hedge funds for those instututions with 10 or more years experience in hedge funds. While fund of hedge fund assets remain “the single largest source of capital for hedge funds at 29% of industry capital,” Hennessee’s findings showed an increase in direct investor assets in the past year. Managing Principal E. Lee Hennessee believes the growth of these assets, includig pensions, endowments and foundations, may continue “due to lower fees in direct investing and a move to more active fiduciary oversight (UPIA and ERISA).”

In 2009, the Hennessee Arbitrage/Event Driven Index advanced +30.8% as the strategies capitalized on the “massive deleveraging and forced liquidations in 2008” that transformed into 2009 gains. The Hennessee Long/Short Equity Index jumped +21.4% last year, and those funds “most willing to take on heightened directional risk were most rewarded as the equity markets experienced a strong, broad based rally.” Finally, the Global/Macro adcanced +24.6%, and macro managers who took long positions in gold and oil and short positions in the U.S. dollar and treasuries were particularly successful.

“Despite many of the well publicized challenges the industry faced entering 2009, particularly after the Madoff scandal,” Mr. Gradante stated in the press release, “the industry was able to persevere and experienced +37% in new asset growth over the full year period.”