GLOBAL ASSETS: Hedge fund assets up 6% in H1, closing in on pre-crisis peak

September 30, 2013  

DATA INCLUDES: Global hedge fund assets by region, global growth of hedge fund assets


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Assets in global hedge funds continued their steady rise in the first half of 2013, increasing at a faster rate than in both the first and second halves of 2012, where the corresponding growth rates were 4% and 3%, respectively.

Assets in hedge funds of traditional types, which are mostly domiciled offshore or structured as limited partnerships in the US, managed total combined assets of $2.337 trillion (including where they have parallel onshore versions) at the mid-point of 2013.

This figure marks an increase of almost 6% from the figure of $2.208 trillion at the end of 2012 – and is up by almost 9% from the same time last year, when assets stood at $2.147 trillion as at the end of June 2012.

This represents one of the biggest 12-month increases since the financial crisis erupted in 2008 and is only superseded, albeit just slightly, by the recovery in assets that was seen at the end of 2010.

If other hedge funds in standalone onshore European UCITS structures (with no parallel offshore versions) are added, the total reaches $2.456 trillion, up from $2.339 trillion at the end of last year – giving a six-month rise of 5%, which was slightly lower than the rise in hedge fund assets alone due to the contraction seen in UCITS funds.

However, this combined asset figure illustrates that the industry is now less than 10% away from its peak of $2.7 trillion, suggesting that it is finally putting the struggles of the financial crisis behind it.

Given that the average performance of hedge funds for the first half of 2013 – as measured by the HedgeFund Intelligence Global Composite index – was 3.75%, the increase in assets of 6% over the same period shows that the industry is seeing net investor inflows on top of organic performance-related, although the overall pace of new investor allocations is still somewhat cautious.

At the epicentre of this increased pace in asset growth is the continued expansion in size and number of the largest single-manager firms in the US – as measured by the Absolute Return Billion Dollar Club, which includes all those US firms with hedge fund assets of at least $1 billion.

The Absolute Return Billion Dollar Club grew in number by 18 firms and increased its assets by $110 billion in the first six months of the year, up from $1.46 trillion to a total of $1.57 trillion – its highest level since the pre-crisis peak, representing an increase in assets of 7.5% over the past six months. There are now 11 US-based firms managing over $20 billion each in hedge fund assets.

In Asia, which has seen Japanese funds gain over 17% (on a yen basis) during the first half of the year as a result of Japan’s bullish markets, there has been a rapid growth spurt – with assets up from $139.08 billion at the end of last year to $152.84 billion as at mid-2013, representing a 10% gain.

The majority of asset gains seen over the past six months have been into the Japanese long/short and market-neutral sector, which rose from $14 billion to $18 billion, and also into Asia including Japan and market-neutral, which is up from $18 billion to $23 billion. The size of the Asia-Pacific is now at its second-largest level on record, with only 2007 showing a greater overall industry asset figure.

In contrast, Europe has seen muted growth in 2013, up from $435.7 billion at the end of 2012 to $444.6 billion by mid-2013, an increase in assets of just 2% this year. However, the relatively sluggish overall growth of the European industry was mainly due to the sharp fall in assets under management in the beleaguered managed futures sector – which is by some margin the largest strategy sector in Europe, accounting for 20% of assets.

The decline in managed futures assets served to offset gains seen in most other sectors of the industry in Europe – notably long/short equity, credit and macro. Despite the lacklustre overall growth, our research shows that at the top end, at least, there continues to be healthy growth in Europe – with the number of funds managing over $4 billion in assets (not including UCITS-only managers) rising from 22 at the end of last year to 24 at the end of June.

The total European hedge fund assets managed by this group now totals $261 billion – an increase of almost 5% in the last six months – and accounts for close to 60% of the total industry in Europe, with the top three firms alone representing more than 20% of the European industry.

The general outlook appears positive in terms of further global hedge fund assets growth over the second half of 2013 – given the solid performance this year across most of the industry and the increasing appetite of investors worldwide for increased hedge fund investments.

If global assets (including UCITS and other onshore funds) continue to grow at their current pace, then the industry should be on course to exceed its previous peak by this time next year.

The size of it: global hedge fund assets by region at the end of H1 2013 

Growth in global hedge fund assets 2000-H1 2013 

Where in the world were the assets managed in H1 2013?

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