Wednesday, 28 September 2016
Last updated 9 hours ago
Mar 5 2009 | 12:12pm ET
Global hedge fund assets dropped sharply last year to just over $1.8 trillion from $2.646 trillion at the beginning of 2008, according to new research from Hedge Fund Intelligence.
The decline came entirely in the second half, as assets fell 32.96% from $2.697 trillion at the end of June to $1.808 trillion at the end of December. The drop stems from both negative performance and net redemptions, amid the tumultuous conditions wrought by the global economic crisis.
With a significant number of funds having imposed gate restrictions or redemption suspensions, the data provider expects assets to fall another 20% or more over the next few months before assets bottom out. However, there are indications that many end-investors plan to increase their allocations to hedge funds this year, given that hedge fund performance, while negative in 2008, has continued to be significantly better than the returns from most other asset classes, including equities or real estate.
The number of firms running hedge fund assets of $1 billion or more fell from 395 in mid-2008 to only 311 at the end of the year, according to HFI. The combined assets of the billion-dollar club also fell from $2.161 trillion to $1.455 trillion.
New York remains the top centre for hedge funds with over 120 billion-dollar firms and close to 47% of the assets of the club. London, in second place, has 65 billion-dollar firms with a 17% share of assets. Eight of the top 10 firms by assets are based in the U.S., with the other two—Brevan Howard Asset Management and Man AHL—based in London.
Assets in Asia-Pacific hedge funds fell at the fastest rate in 2008, from over $190 billion to $122 billion by the end of the year, a decline of about 36%. A higher proportion of the Asian funds have equity-based strategies—where performance was particularly poor in 2008—and Asian funds saw more redemptions, as they generally have easier liquidity terms.
New fund launches were sharply down in 2008 in all the major hedge fund markets. In the U.S., there were only 55 new funds started last year that raised $50 million or more—down from 81 new funds of that size or more in 2007. Together they raised a collective $23 billion, down from over $31 billion the previous year.
In Europe, the total number of new funds dropped from 370 in 2007 to just 201 in 2008, with the assets raised down from $33 billion to $17.8 billion. Some 79 of those funds raised $50 million or more with collective assets of $15.7 billion.
In Asia, the number of new funds contracted from 116 in 2007 to 75 in 2008—with collective assets plummeting from $7.8 billion in 2007 to only $2.9 billion in 2008. Only 17 of the new Asian funds reached $50 million or more, with collective assets of just over $2 billion.
Further evidence of the unprecedented difficult conditions for the industry last year comes from the number of funds shut down during the year. In the U.S. and the Americas, Absolute Return has identified at least 200 shutdowns during the year.
In Europe, there are at least 153 confirmed shutdowns for 2008 (up from 124 the previous year) with the final figure yet to be confirmed. And in Asia, there were at least 100 shutdowns—more than double the figure from the previous year.