We saw an explosive growth in new funds during the 1990s through the first half of this decade. That pace certainly couldn't be sustained forever, and difficult markets compounded that effect
New York, NY (PRWEB) April 2, 2009
PerTrac Financial Solutions (PerTrac) today announced the aggregate results of the 2008 PerTrac Hedge Fund Database Study, revealing a 1.3% drop in the number of hedge funds and funds of hedge funds included in major hedge fund databases since last year's study. The study found a total of approximately 22,350 distinct investment vehicles among the databases at the end of 2008.
"Although the hedge fund industry remains larger than many published estimates have asserted, it was definitely adversely impacted by 2008's difficult market conditions," said Meredith Jones, managing director of PerTrac. "Our research reveals 1.3% fewer funds among the 11 databases in our study versus one year earlier, the first-ever year-over-year decrease in funds we've seen since we began producing our annual study in 2003."
"The number of both single-manager hedge funds and funds of funds fell last year, dropping by 0.5% and 3%, respectively," Ms. Jones added. "The decline in total fund managers combined with poor average performance and high redemption rates took its toll on hedge fund assets under management as well. While the total number of funds showed a perhaps surprisingly small decrease, reported assets among single-manager hedge funds declined a marked 36.1% between year-end 2007 and 2008, down to $1.33 trillion."
The study, released annually since 2003, is a widely-followed indicator of the size and composition of the hedge fund industry. The 2008 study was conducted using data from eleven major hedge fund databases, combined and analyzed with the PerTrac Analytical Platform, the world's leading investment analysis and asset allocation software application.
Key Findings of the 2008 PerTrac Hedge Fund Database Study
The 2008 PerTrac Hedge Fund Database Study found a total of over 56,000 investment records across all databases, including both single-manager hedge funds and funds of hedge funds (FOFs). Records are the total number of funds and fund classes in all databases, including all duplicate records.
Within the overall collection of more than 56,000 records, the PerTrac Analytical Platform revealed approximately 22,350 distinct hedge funds and fund of funds among the various hedge fund databases, once duplicate records were removed. This figure counts individual share classes within funds as distinct investments.
Other key findings include:
- Approximately 20,200 distinct funds reported performance data in 2008.
- Approximately 15,150 single-manager hedge funds were identified, and approximately 7,200 FOFs were identified. This compares with 15,250 single- manager hedge funds and 7,400 FOFs identified in the 2007 study.
- Just under 5,350 distinct fund management companies (e.g., general partners) were counted. Related fund management companies (subsidiaries, etc.), where identifiable as such, were counted as a single fund company.
- Of the 15,150 single-manager hedge funds, approximately 13,450 reported performance in 2008. Of those, approximately 28% were U.S. domiciled funds and 72% were non-U.S. domiciled.
- Approximately 6,750 FOFs reported performance in 2008. Of those, approximately 13% were U.S. domiciled while 87% were non-U.S. domiciled.
- The number of U.S. domiciled funds dropped by 15.8% in 2008, while the number of offshore domiciled funds grew by approximately 5.1%.
- Approximately 9,200 (61%) of the single-manager funds appear to be 'clones' of another fund, meaning that they trade pari passu, either as offshore funds, super-accredited (3(c)7) funds or separate share classes (usually differing in currency denomination) of a single fund strategy.
Assets under Management by Single-Manager Funds Shrink to $1.33 Trillion, $750 Billion Allocated through Funds of Hedge Funds
Single-manager funds in the databases account for approximately USD 1.33 trillion under management. Over 200 funds held assets in excess of USD 1 billion. Meanwhile, half of single-manager funds manage less than USD 25 million (see chart).
There were approximately 7,200 different FOFs that appeared in the study, of which 6,750 had reported performance numbers in 2008. Of those FOFs which had reported returns last year, about 12% were domiciled in the U.S. and 88% outside the U.S. There appears to be about USD 750 billion invested into hedge funds through FOFs. This represents a 23.5% decline in assets managed through FOF vehicles in 2008. Like single manager funds, a large percentage of FOFs are relatively small, with approximately 46% of them managing less than USD 25 million. (See chart.)
Among the 22,350 distinct investments identified in the study, approximately 2,000 of them appear to be managed by Commodity Trading Advisors (CTAs). These managers' funds or investment programs typically trade mainly futures and currencies. Reported assets among these investments totaled approximately USD 230 billion. Those figures represent a 2.7% drop in the number of CTA funds and a 29% drop in assets from a year earlier.
"Despite strong, uncorrelated average performance in 2008, CTAs appear to have been caught up in the wave of redemptions that hit hedge funds," said Jones. "We believe this is largely attributable to what one might call 'ATM Syndrome,' where investors redeemed from any vehicle that would grant them swift access to cash, whether due to market uncertainty or immediate liquidity needs. As markets improve, it will be interesting to watch how investors allocate to CTAs given recent and dramatic proof of their diversification and alpha generation abilities."
Nearly Half of all Funds Report to Only One Database
Approximately 10,500 funds in the study -- approximately 47% -- were present in only one out of the eleven databases. More than 70% of funds reported to three or fewer databases.
"It has perhaps never been as clear that investors need to access multiple data sources to get a broad view of the hedge fund universe when screening for investment opportunities, conducting peer group analyses or doing other research. In an environment where only approximately 30% of funds were able to remain flat or post gains, searching across the widest universe of funds gives investors the best chance of finding superior performers. Just adding one additional database can make a significant difference in total number of funds available for manager searches or peer analysis. For instance, combining the two largest of the 11 databases in the study and then removing the overlap results in 46% more funds than in the largest database alone."
Launches of New Funds Continue to Fall
The numbers of new hedge fund and fund of funds launches continued their downward trend in 2007. (Figures for 2008 fund launches are not considered reliable indicators and are not disclosed here because many newly launched funds do not begin reporting to databases prior to their one year anniversary.)
About 5,200 single-manager hedge funds began trading in 2007, down 25% from 2006, when approximately 6,950 new single-manager funds launched. That figure represents a 15% decline from 2005.
Launches of new FOFs fell for the third consecutive year in 2007. Just under 2,400 new FOFs started that year, a decrease of 23% from 2006, when 3,100 new FOFs launched. The 2006 figure marked a 13% decrease from 2005.
"We saw an explosive growth in new funds during the 1990s through the first half of this decade. That pace certainly couldn't be sustained forever, and difficult markets compounded that effect," noted Jones. "After the current market downturn plays out, though, we expect an uptick in fund launches as managers of recently liquidated funds and other investment professionals return from the sidelines."
The Eleven Databases in the PerTrac 2008 Hedge Fund Database Study
The databases included in the study were Barclay Hedge Fund DataFeeder, Barclay CTA DataFeeder, CASAM CISDM, CogentHedge, Eurekahedge Global Hedge Fund Database, Eurekahedge Global Fund of Funds Database, HedgeFund.net from Channel Capital Group, Hedge Fund Research, Lipper TASS, Morningstar (formerly Altvest), and the Morningstar MSCI Hedge Fund Indices & Database(SM). The study tagged duplicate fund records, CTAs, funds of funds and clone funds using various analytical and statistical methods, and the data was manipulated in a number of ways to yield aggregate information on the hedge fund universe.
About the PerTrac 2008 Hedge Fund Database Study
The PerTrac Hedge Fund Database Study is part of an ongoing effort to provide high quality aggregate investment information to PerTrac clients and the general public. The study was completed using the PerTrac ID feature in the PerTrac Analytical Platform. PerTrac IDs allow users to combine two or more databases from different data vendors and easily create a universe of unique funds, based on the PerTrac ID, hiding duplicate records based upon the users' chosen data vendor priority. PerTrac users gain the benefit of having multiple databases and a larger data sample without having to manually identify duplicate records. They also can easily toggle between data sources to access the full complement of information available on each fund, which often varies between data vendors even when the same fund is referenced.
About PerTrac Financial Solutions
PerTrac Financial Solutions was founded in 1996 with the goal of creating a comprehensive suite of software solutions for investment professionals. Now an industry standard, PerTrac software is used by more than 2,000 clients in 50 countries, including banks, brokerage firms, consultants, plan sponsors, family offices, investment managers and funds of funds. The company's flagship product, the PerTrac Analytical Platform, is now the world's leading asset allocation and investment analysis software, used by approximately 1,700 firms worldwide. PerTrac CMS, which was part of its January 2006 acquisition of Whittaker Garnier, is another major component of the PerTrac Suite. PerTrac CMS is the investment industry's leading tool for managing the client relationships and workflows associated with capital raising, investor relations, and investment management, and is used by nearly 300 alternative investment firms around the world. In January 2008, PerTrac announced the release of PerTrac Portfolio Manager, a unique software application designed to help funds of funds and institutional investors create, monitor and manage multi-manager portfolios of alternative investments. PerTrac P-Card, released in November 2008, is a revolutionary new investment data distribution and collection platform, which gives managers and investors the tools they need to share sensitive information directly, electronically and securely. PerTrac Financial Solutions is headquartered in New York with offices in London, Hong Kong, Tokyo, Reno, and Memphis. For additional information on the full suite of PerTrac products, please visit http://www.pertrac.com.
Bode & Associates