The $1 trillion growth market
Private investors and institutions have both benefited from the flexibility of hedge fund products. But as the market matures, the products available have become more complex and the strategies employed more diverse. And with market growth comes a possible dilution of the hedge fund ideal. What should investors do now?
FL, Aima: Perhaps to start with it would be helpful if I set the scene. Hedge fund assets under management globally are estimated at around $1 trillion. In Europe, 228 funds were set up last year that raised $20 billion of new money. Europe today is growing faster than America and, in turn, Asia is growing faster than Europe. So let's first look at the positioning of hedge funds: what do we know about the investor base? Barry why don't you go first?
BB, Deutsche Bank: Well, the volume figures are instructive. That $1 trillion represents a 10-fold increase over the past decade, and it's more than a doubling since the 1998 crisis. Interestingly, less than half of the growth has been from asset inflows: 55% has been a result of performance. The number of funds has also grown rapidly with about 6,300 managers now in existence. According to an internal survey we carried out, about 55% of those are funds of funds. Of the remaining 45% the largest sectors are 15% family offices, 7% banks. In terms of assets, the funds of funds represent around $300 billion, with the top 50 controlling $210 billion of investments.