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HFI: European hedge fund launches and assets on the rise again, London still leads

Monday, March 01, 2010
Opalesque Industry Update - Assets in European hedge funds are finally starting to climb again after their sharp fall during 2008 and the first half of 2009 and were up by about 10% in the second half of last year to reach $382 billion, according to new research compiled by HedgeFund Intelligence, publisher of EuroHedge, AsiaHedge, and InvestHedge, and the U.S. based magazine AR: Absolute Return + Alpha.

The latest survey reveals an increase in assets from the recent low of $350 billion recorded in the mid-year survey of 2009. This leaves the total still some way short of the figure of $398 billion measured one year ago. However, if one also adds in the $22 billion-plus of further assets that are now running in stand-alone onshore single-manager hedge fund strategies compliant with rules for UCITS III funds in the European Union, then this brings the current European industry total to nearly $405 billion and back above the total at the end of 2008. This higher total is arguably the fairer comparison given that there were various funds counted in last year's survey that have since been converted to be UCITS-compliant.

Given that more and more firms are continuing to add UCITS-compliant versions, the HedgeFund Intelligence research team plans to measure developments via a new recently launched UCITS database, so that we continue to provide accurate quantitative analysis of the industry going forward both with and without the UCITS vehicles.

The revival in the asset total comes after a traumatic period when the industry was severely hit by the global financial crisis and it still remains a long way short of the all-time European high of $575 billion that we recorded at the end of 2007.

New hedge fund launches on the rise again
The pace of new hedge fund launches in Europe started to pick up rapidly in the second half of 2009 after a dramatic slowdown earlier in the year although the acceleration in activity in the final months of the year was not enough to stop the full-year result being the lowest for many years.

The latest annual survey of new hedge fund launches conducted by the EuroHedge research and data team showed that at least 142 new hedge funds launched in Europe in the 2009 calendar year, raising combined assets of some $11.1 billion.

The number of new funds launched was the lowest since 2000, when EuroHedge first started compiling its annual survey of new fund launches, and was lower even than the 149 new European funds launched in 2001, when the industry was a fraction of its current size.

For the first time, the annual new fund survey also covered the fast-growing area of UCITS fund launches but only those new UCITS funds that were launched by existing hedge fund management companies; funds that were replications or versions of existing hedge fund strategies; or other UCITS funds launched by non-hedge fund firms that genuinely use hedge fund strategies and techniques.

Using those criteria, the survey found that there were also 65 UCITS hedge fund strategies started in 2009 (of which over 40 came in the second half of the year) - including new standalone funds and so-called UCITS 'clone' strategies where an existing hedge fund strategy is made available in UCITS form or where a hedge fund that was previously structured in an offshore format was converted into an onshore UCITS-compliant vehicle instead.

Taking the 24 'clone' strategies and the 41 standalone UCITS funds that were launched during the year - which raised assets of $2.3 billion and just over $3.4 billion respectively - and adding them to the figures for pure hedge fund launches during the year, the combined totals for all 'new' launches were 207 funds and assets raised of $16.8 billion.

London still leads
Despite a lot of chatter during the year about the threat of higher taxes and tighter regulation encouraging a migration of hedge fund managers out of the UK, so far at least our statistics do not back this up at all.

To the contrary, the proportion of European hedge fund assets managed from the UK actually edged up slightly during the second half of the year, from 75.18% at the mid-year point to 76.06% at the end of the year.

The proportion of assets managed from Switzerland, widely touted as the most popular alternative location to London, was up too, but only slightly from 3.76% to 3.93%.

Indeed Sweden, where the bulk of assets are in onshore vehicles, remains a bigger centre for single-manager funds than Switzerland and is in second place overall after the UK.

Nick Evans, editor of EuroHedge commented: "Our surveys clearly show that the European hedge fund industry has turned the corner and is starting to recover quickly from the earlier downturn. Money is flowing back into hedge funds at a time of heightened uncertainty and volatility in world markets and the pace of new fund launches is accelerating again, both in terms of traditional offshore hedge funds and also in the fast-growing area of UCITS-compliant onshore hedge funds." Corporate website: www.hedgefundintelligence.com

- FG

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