| Hedge Fund Observer: Still more funds, but smaller |
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| 05/03/2006 | |
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Hedge funds had a tough run in 2005, but this hasn't stopped managers from launching even more of them. According to EuroHedge, a specialised information service, in 2005 there were 32% more new hedge fund creations than the previous year. Private equity firms Kohlberg Kravis Roberts has already set the tone for 2006 by announcing its plans to launch a $1bn hedge fund, according to various reports. The 330 funds launched in 2005 have raised a total of $27.82bn, while the 250 launches in 2004 amounted to a $22.79bn collect. This means that the average size of the funds launched in 2005 shrunk from $90m to $83m. Nevertheless, there has been a handful of blockbuster launches: six funds collected over $1bn and 14 funds more than $500m in 2005. Globally, multi-management has been the engine behind the growth of the hedge fund industry, albeit at a slower pace. "In fact, despite returns averaging just over 7% for the year, the global funds of funds industry still grew by more than $72bn. In 2004, it had grown by about $166 billion", reported EuroHedge. Niki Natarajan, editor of InvestHedge, a sister publication of the EuroHedge, said: "Low volatility was the most frequently blamed factor for another lacklustre year in terms of performance. The long awaited asset flow slowdown has finally taken place, but not across the board, proving that the right infrastructure, resources, range of products, distribution as well as performance, will continue to win assets". Elsewhere, the UK's Financial Services Authority said that it had found overall prime brokers' exposures to hedge funds were "reassuring", meaning that the counterparty risk posed to banks remains limited. "The large exposures of the prime brokers were generally to the larger established hedge funds. Overall leverage was moderate, and although there were considerable differences in leverage by strategy, these were much as expected", stated the FSA, which collected information from a sample of large prime brokers operating in London. It also said that there was generally a healthy margin of collateral over minimum margin requirements. J.L. |
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