Investors keep pouring money into the global hedge fund industry in spite of mixed performances this year and scandals involving lesser known funds.
Assets at single-manager hedge funds climbed to $1371bn at the end of September, from $1,000bn last year, said a survey of fund administrators by Hedge Fund Manager (HFM) magazine and Advent Software. Assets at funds of hedge funds rose 33 per cent to $709bn over the same period.
While hedge funds have received unfavourable publicity due to collapses at a handful of lesser-known US funds, the results suggest that the scandals have not damped the appetite for hedge funds.
As hedge funds are not required to disclose information about the size or constitution of their portfolio, it is difficult to pinpoint a precise total amount of money hedge funds manage. However, most surveys put the figure at roughly $1,000bn.
According to a 2004 survey by Platinum Capital Management, the industry is expected to grow to $4,000bn in assets by 2010, driven by demand from institutions such as pension funds seeking above-market gains in a low-return environment.
HFM, however, notes that the growth in assets this year has come in spite of “patchy performance”. The CSFB/Tremont Hedge Fund index, which includes performance figures from 408 hedge funds, was up 5.9 per cent in the first nine months of the year.
The mid-single digit returns have led analysts to question whether hedge funds are worth the heftier fees they charge – the industry standard tends to be a 2 per cent management fee and 20 per cent of returns. However, some fund strategies have outperformed several major indices this year. The S&P 500 rose 2.8 per cent in the nine months to September 30, while the MSCI World index rose 6.7 per cent in the same period.
The survey found that fund admistrators believed Asia was likely to see the biggest inflow of assets in the coming years. Currently, 58 per cent of hedge fund assets are in the US, with Europe at 24 per cent and Asia at a 5 per cent.
Merrill Lynch said Asian hedge funds had their best month in 2005 in September. The AsiaHedge Composite index rose 2.43 per cent in the month, extending gains for the year to date to 7.66 per cent.
The organisations surveyed include major players such as Citco and HSBC down to smaller administrators with $200m in assets under administration.
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