Fri, Nov 28, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Hennessee: hedge funds recoup lost assets and return to 2008 levels of $1.96tln (est.)

Monday, March 01, 2010
Opalesque Industry Update - Dramatic Shift in Sources of Capital for Hedge Funds in the Last Decade

Hennessee Group LLC, an adviser to hedge fund investors, estimates that hedge fund industry assets increased by $751 billion in 2009 to $1.96 trillion. To avoid double counting, fund of fund assets are not included in the asset growth analysis but are included as “Sources of Capital” for managers. The jump in assets represents a +62% increase since the beginning of 2009 and leaves industry assets at their pre-crisis levels in 2007. Preliminary results indicate that the hedge fund industry experienced net inflows of $448 billion (+37%) in 2009. The amount of inflows ($448 billion) represents the largest inflow of assets in the hedge fund history and is a dramatic reversal compared to the -20% decline in asset flows in 2008 ($399 billion). The remaining $302 billion (+25%) gain in assets was the result of positive performance as the Hennessee Hedge Fund Index jumped +24.6% in 2009, the best annual gain since 1999.

“Despite many of the well publicized challenges the industry faced entering 2009, particularly after the Madoff scandal, the industry was able persevere and experienced +37% in new asset growth over the full year period,” said Mr. Charles Gradante, Co-Founder of Hennessee Group. “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 institutions with 10 or more years experience in hedge funds.” (See “Lost Decade” Press Release January 19, 2010).

“A noteworthy development in our 2009 research is the decline in fund of hedge fund assets and continued rise in direct investor assets, predominantly by pensions, endowments and foundations,” said E. Lee Hennessee, Managing Principal of Hennessee Group. “A trend we believe that could continue into the future due to lower fees in direct investing and a move to more active fiduciary oversight (UPIA and ERISA).”

See chart “Hedge fund industry assets (in billions)” here.

HEDGE FUND SOURCES OF CAPITAL

Hennessee Group Research finds that “Fund of Hedge Funds” remain the single largest source of capital for hedge funds at 29% of industry capital. Of those that invest directly into hedge funds: individuals/family offices are at 26%; pensions represent 19%; endowments/foundations represent 14% and corporations represent 12%. This is in sharp contrast to the Hennessee Group Manager Survey a decade ago (2000) when individuals/family offices represented 53%; fund of funds represented +20%, pensions represented 9%; endowments/foundations represented 7% and corporations represented 12%.

ASSET FLOWS

Total assets for arbitrage and event driven funds were up approximately +44% in 2009. The Hennessee Arbitrage/Event Driven Index (which includes distressed) gained +30.8% for the year. Arbitrage and event driven strategies were able to take advantage of the massive deleveraging and forced liquidations in 2008, and generate outsized gains in 2009 as stability returned to t

he financial markets. The arbitrage and event driven space experienced the greatest inflows for the year. Total assets for long/short equity funds increased approximately +32% in 2009, with +10.6% coming from new assets and +21.4% through performance. The Hennessee Long/Short Equity Index rose +21.4% in 2009. Long/short equity funds most willing to take on heightened directional risk were most rewarded as the equity markets experienced a strong, broad based rally.

Total assets for global/macro funds rose +29% in 2009, with +4.4% coming from new assets and +24.6% through performance. The Hennessee Global/Macro Index gained +24.6% for the year. Global/Macro funds benefited from strong international equity markets, particularly the emerging markets. In addition, macro managers generated profits in short positions in the U.S. dollar and treasuries, and long positions in oil and gold. Macro managers also took advantage of historically low rates, particularly in the U.S., to profit from the carry trade.


Hennessee Group LLC is a Registered Investment Adviser that consults direct investors in hedge funds on asset allocation, manager selection, and ongoing monitoring of hedge fund managers. Hennessee Group LLC is not a tracker of hedge funds. The Hennessee Hedge Fund Indices(R) are for the sole purpose of benchmarking individual hedge fund manager performance.


Bg

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Unlucky Paulson & Co. rebrands $1.6bn Recovery Fund after 13% drop[more]

    From Businessweek.com: A maturing U.S. economic recovery is prompting Paulson & Co. to change course. The $19 billion hedge fund firm, led by billionaire John Paulson, told investors on a conference call this month that the Paulson Recovery Fund will be renamed Paulson Special Situations Fund on Jan

  2. Opalesque Roundtable: Islamic Finance races ahead with Sukuk, the first managed account platform, and foreign demand[more]

    Komfie Manalo, Opalesque Asia: A number of developments took place within Islamic finance in the past years, including the launch of a Islamic managed account platform and the further growth of the sukuk space that saw this instrument evolve from being a type of an ABS security that was rarely

  3. CTAs , event-driven strategies lead hedge funds recovery in mid-November[more]

    Komfie Manalo, Opalesque Asia: November’s performance proves to be in sharp contrast to the previous month, with equities further consolidating their upswing last week, according to the latest Lyxor Asset Management’s Weekly Brief. CTA funds als

  4. Fund Profile - A complex hedge fund strategy works for United Technologies[more]

    From Institutionalinvestor.com: Reports that portable alpha is dead have been greatly exaggerated, as Mark Twain might have phrased it. Another Connecticut Yankee, giant United Technologies Corp., is gearing up to grow its successful, nearly decade-long portable-alpha program. The UTC strategy took

  5. Opalesque Exclusive: The unintended consequences of Basel III[more]

    Benedicte Gravrand, Opalesque Geneva: Bijesh Amin, co-founder and managing director of Indus Valley Partners (IVP), a technology solutions and services firm focused on the alternative asset management industry, has recently observed