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Opalesque Industry Update - Hedge fund industry liquidations returned to
pre-financial crisis levels in the second quarter (2Q10), according to data
released today by Hedge Fund Research, Inc. (HFR), the leading provider of
hedge fund industry data. Led by steady performance, a return of new
investor capital and greater clarity around financial reform legislation,
hedge fund liquidations fell to 177 in 2Q10, bringing the total number of
fund closures to 417 in the first six months of 2010. For the quarter, the
fund attrition rate, defined as the number of liquidations as a percentage
of the overall number of funds, dropped to below two per cent. Funds of
Hedge Funds (FOFs) experienced the fewest number of liquidations (54) since
1Q08; since the start of the financial crisis, over 800 FOFs have
liquidated, reducing the number of FOFs from nearly 2,600 in mid-2008 to
approximately 2,100 as of 2Q10.
Fewer Funds Launched as Investor Preference for Top Firms Continues
New hedge fund launches also declined in 2Q10, with only 201 funds
launching, the lowest level since 2Q09; by strategy, Equity Hedge and Macro
experienced the greatest number of new launches. During the first half of
2010, investors exhibited a clear preference for the industry's most
established firms, allocating nearly all of the $23 Billion of new investor
capital to firms with greater than $5 Billion in assets under management
(AUM). These firms currently control approximately 60 percent of all hedge
fund industry capital.
Fund Performance Dispersion Gap Narrows
Performance dispersion amongst hedge funds declined from record levels with
69 percent separating the best and worst performing deciles of funds for the
12-month period ending 2Q10. The top decile of hedge funds averaged a return
of 52.2 percent during this period, while the bottom decile lost 16.8
percent. Performance dispersion had reached a peak level of over 130
percent in the 12-month period ending 1Q10.
"Volatility returned to financial markets in 2Q10 as investors lowered
expectations of the global economic recovery," said Ken Heinz, President of
Hedge Fund Research. "Despite this volatility, fewer funds have liquidated
recently as a function of steady performance, improved structural integrity
and renewed investor confidence in the hedge fund industry."
(press release)
About HFR
Hedge Fund Research, Inc. (HFR) is the global leader in the alternative
investment industry. Established in 1992, HFR specializes in the areas of
indexation and analysis of hedge funds. HFR Database, the most comprehensive
resource available for hedge fund investors, includes fund-level detail on
historical performance and assets, as well as firm characteristics on both
the broadest and most influential hedge fund managers. HFR has developed the
industry's most detailed fund classification system, enabling granular and
specific queries for relative performance measurement, peer group analysis
and benchmarking. HFR produces over 100 indices of hedge fund performance
ranging from industry-aggregate levels down to specific, niche areas of
sub-strategy and regional investment focus. With performance dating back to
1990, the HFRI Fund Weighted Composite Index is the industry's most widely
used standard benchmark of hedge fund performance globally. The HFR suite of
Analysis Products leverages the HFR Database to provide detailed, current,
comprehensive and relevant aggregate reference points on all facets of the
hedge fund industry. HFR also offers consulting services for clients seeking
customized top-level or more nuanced analysis. For the hedge fund industry's
leading investors and hedge fund managers, Hedge Fund Research is The
Institutional Standard.
(www.hfr.com)
KM
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