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Alternative Market Briefing

Key trends in European hedge funds show signs of sustained competition

Wednesday, July 20, 2016

Benedicte Gravrand, Opalesque London:

According to Eurekahedge’s July 2016 report, European hedge funds have a short life-span and are using fees to beat the competition. But the majority are still small in size and domiciled offshore.

The share of European smaller sized hedge funds (less than $100m) accounted for 53% of the industry in 2008, increased to 65% in 2011, and has declined since to 57%. Large-sized hedge funds overseeing more than $500m have a share of roughly 15% in 2016 - a slight increase from their share in 2011 (10%).

"While it is possible that some smaller sized hedge funds break into the next AuM bracket, it is also likely that smaller sized hedge funds exited the industry altogether," comments the Singapore-based data provider. "With the Eurozone crisis and challenges in the trading sphere, small sized hedge funds face difficulty both in raising their asset base and in protecting their current capital. Conserving capital is much more difficult for smaller-sized hedge funds especially when exposed to large unexpected market moves."

Eurekahedge’s data found that European active funds have a median track record of 7.9 years while obsolete funds have a track record of 4.1 years.

"While the competition for a limited pool of investors has resulted in lower average fees offered by new entrants, the market presence of larger and well-established hedge funds is a challenge for new hedge funds as well since their presence acts like a 'barrie......................

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