| Hedge fund observer: investors happy with their toys |
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| 09/10/2005 | |
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According to Hennessee's 8th annual survey of hedge fund investors, hedge funds have met or exceeded expectations for 91% of their users. Coupled with a 27% hedge fund industry growth in 2004, the Hennessee Group says that these results indicate a growing use of hedge funds for portfolio diversification and downside risk protection. "Hedge funds have evolved into an industry since my first introduction to them in 1980 and investors are becoming far more comfortable with hedge funds as an asset class," says Elizabeth Lee Hennessee, Founder and Managing Principal of Hennessee Group LLC. "We believe it is becoming common practice to consider hedge funds within a stock and bond allocation," she added. Direct investments seem to be a better bet for more investors than funds of hedge funds – at least in the United States, where the survey was conducted. About 40% of direct hedge fund investors said their investments exceeded their expectations, compared to 19% of fund of funds investors. On average, direct hedge fund portfolios outperformed fund of hedge fund portfolios by 4%. Hennessee's survey, which includes 94 hedge fund investors, mostly in the US, including sophisticated individual investors and institutional investors, with a total of over $278 billion in investable assets, also found that the average hedge fund investor continues to have approximately one third of their investable net worth allocated to hedge funds. However, the investors surveyed now tend to break their hedge fund allocation into a larger number of funds. When Hennessee first began its annual survey, the average portfolio of direct hedge fund investments consisted of 3 hedge funds. Currently, the average portfolio consists of 13 hedge funds. Slowdown Another set of data from Eurohedge, the trade magazine, showed a slowdown in the European hedge fund industry asset growth in the first half of 2005. The combined total assets of all European hedge funds grew by 9.4% from January 1 to June 30 this year. The half-yearly survey of industry assets shows that total assets rose from $255 billion at the end of December 2004 to $279 billion at the end of June. That compares with a figure of $216 billion at the same stage last year – giving a year-on-year growth rate of 29%. By comparison, the European hedge fund industry's assets grew by 50% in the 12 months to the end of December 2004, having virtually doubled in the 2003 calendar year. "While the growth rate may have slowed, the continuing increase in European hedge fund assets should be seen in the context of an industry that has seen its overall asset size almost treble since the start of 2003" , stated Eurohedge. "But it also shows the relative maturity of the European and US industries against the more nascent Asian hedge fund industry – where assets grew by almost 30% in the first half of the year (…)" J.L. |
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