Hedge Fund Assets Return To $2T Level, Biggest Funds Get Bigger

Mar 29 2011 | 12:49pm ET

Global hedge fund assets topped $2 trillion by the end of last year as investors began to return to the asset class in droves.

Total industry assets grew by 11% from the $1.82 trillion managed at the end of 2009 to $2.022 trillion, according to HedgeFund Intelligence. When UCITS III-compliant and other onshore European hedge funds are included, the figure rises to $2.099 trillion, a 13% jump year-on-year, showing the growing popularity of the heavily-regulated European fund structure.

Hedge funds still have a way to go before returning to their historic $2.6 trillion peak of more than three years ago.

"The latest numbers confirm that the hedge fund industry is growing again, although the lion's share of the growth is being captured by the biggest brand names," HFI editor Neil Wilson said. "Investors seem to be increasingly convinced that not only did hedge funds not cause the global financial crises, but also generally performed well during what was a very difficult period."

HFI's numbers show that billion-dollar hedge funds now control 84% of the hedge fund market, up from 82% a year earlier. Much of that growth was recorded by the very biggest hedge funds, those with $5 billion or more in assets, a group that grew by 10 firms to reach 93 and that now manages $1.154 trillion, up from $951 billion at the end of last year.

Still, Wilson said the overall improvement of the industry's prospects should allow "opportunities to improve again for smaller and newer funds."

HFR's annual study also shows that New York remains the undisputed hedge fund capital of the world, with 128 billion-dollar hedge funds managing $764.57 billion, nearly 38% of all of the hedge fund assets in the world. The Big Apple's closest rival, London, has less than half its number of giant hedge funds, with 63 billion-dollar firms, managing less than one-third New York's total, $246.47 billion.

A New York suburb, Connecticut, is the third largest center for the largest hedge funds, with 26 billion-dollar firms managing $180.02 billion. Another Empire State neighbor, New Jersey, chips in with five of its own, managing $27.7 billion.

California and Massachusetts are the fourth- and fifth-most popular homes for billion dollar hedge funds, the former boasting of 19 with $83.22 billion and the latter a dozen with $98.66 billion.

But Hong Kong, to some extent, stole the show, nearly doubling its number of billion-dollar hedge funds to 11 with $15.56 billion, showing the increasing important of Asia to the hedge fund industry. Singapore also boasts seven billion-dollar hedge funds managing $9.64 billion.

Texas and Illinois rounded out the top 10: The former had eight billion-dollar funds with $26.22 billion and the latter six with $26.89 billion.

Other notable billion-dollar hedge fund homes included Sydney, Australia, with five ($19.34 billion), Minnesota, also with five ($18.12 billion), Toronto with four ($6.94 billion), Tokyo with three ($5.39 billion), Edinburgh, Scotland, with two ($11.95 billion), Geneva with two ($8.04 billion) and Rio de Janeiro with two ($3.72 billion).

London's dominance within Europe can be seen by the tiny numbers put up by its continental rivals: Stockholm and Paris each claim three billion-dollar hedge funds, with $18.31 billion and $17.96 billion in assets, respectively.


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