Global Hedge Fund AUM Touches $2.3 Trillion

Aided by excellent performance-based gains delivered by hedge fund managers, the global hedge funds’ assets under management hit a new high of $2.3 trillion in 2014, notes a Eurekahedge report. Separately, as we reported earlier, total alternative assets have hit close to $7 trillion according to data from Preqin.

In its January 2015 report, Eurekahedge touched upon key trends in global hedge funds industry.

Hedge funds: Steady pace of growth in 2014

Tracking the key trends in global hedge funds industry in 2014, the report points out that during 2014, the industry maintained a steady pace of growth building upon the strong gains witnessed in 2013. As can be deduced from the following chart, the assets under management of the global hedge fund industry touched $2.13 trillion in 10,989 funds as at November 2014:

Hedge Funds industry growth

The following graph provides a map view of the global hedge fund industry:

Global Hedge Funds industry map

The report points out that the global hedge fund industry saw a number of different trends last year. As can be seen from the following graph, the financial crisis of 2008 brought an abrupt end to the industry’s growth with assets plummeting to $1.29 trillion by April 2009, thanks to performance-based declines and heavy redemptions by investors.

Net growth and flows of Hedge Funds industry

Turning its focus to asset allocations across various regions since end-2012, the report highlights that Europe stands out as the only region to have consistently attracted monthly net inflows since the start of 2013 up until the first half of 2014:

Monthly asset flows across regions Hedge Funds

 Asset flows across strategies

Taking a deeper dive into asset flows across various hedge fund strategies, the Eurekahedge report points out that long/short equities have recorded the bulk of the asset inflows into the industry, accounting for 74.4% of net asset flows into the industry since 2013:

Asset flows across strategies Hedge Funds

The report also touched upon geographic mandates. The report highlights that as revealed by the following breakdown of AUM by regional mandates, North American funds have enhanced their share of the total industry by 3.9% since 2007, aided by strong inflows over the last three years:

Geographic mandates Hedge Funds

Discussing the yearly growth and attrition rate of the global hedge fund industry since 2007, the Eurekahedge report points out that thanks to enhanced regulatory oversight, higher running costs and a tougher market environment, together with a trend towards consolidation in the industry, the rate of fund closures has moved up over the past few years, particularly among smaller funds. The report highlights that 2014 registered the smallest net increase in the number of funds, as there was a marked increase in fund closures from 2013, while the number of fund launches dwindled:

Launches and closures Hedge Funds

Touching upon the performance dispersion of the hedge funds, the Eurekahedge report points out that the distribution roughly resembles a normal distribution with the average fund returning around 5.7%, though performance is skewed towards the positive extreme with a fatter right tail:

Performance distribution Hedge Funds

The following graph captures the performance of hedge funds since 1999:

Performance since 1999 Hedge Funds