Eurozone Hedge Funds To Shrink

Oct 29 2012 | 12:12pm ET

Some very unfavorable headwinds could lead to a markedly smaller European hedge fund industry, according to a new report.

Hedge funds in the eurozone—which, of course, excludes the continent's largest hedge fund centers, Britain and Switzerland—will manage as much as 12.5% less four years from now, Ernst & Young predicts in a new economic forecast for the region. Assets under management will fall between 1% and 3% every year until 2016, the accounting firm expects.

E&Y blamed both poor returns and the EU's impending strict new hedge fund regulations for the projected decline. "While the same pressures are being felt by hedge funds across the world, those in the eurozone and with larger exposures to the eurozone would be expected to struggle more," Julian Young, head of hedge funds in Europe, the Middle East, India and Africa, told Financial News.

According to E&Y, the eurozone hedge fund industry is already 17% smaller than it was five years ago, with assets down to €50 billion from €60 billion at the end of 2007.

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