News & Events

2014 Key Trends in North American Hedge Funds

Introduction

North American hedge funds continued to record excellent growth for 2014 year-to-date, keeping up with the strong gains seen in 2013 which has raised the region’s share of assets under management (AUM) to approximately two-thirds of the global hedge fund industry. As at August 2014, the total AUM of the North American hedge fund industry has breached the US$1.4 trillion mark to stand at US$1.43 trillion managed by a total of 5,093 hedge funds.

Since the start of the new millennium, the North American hedge fund industry has been on a course of rapid expansion. Beginning with accelerated growth in the pre-2008 period, the industry suffered a set-back during the global financial crisis followed by a sustained recovery post-2009 that has seen AUM crossing the pre-crisis high. In a period of seven years, AUM grew from a base of US$275 billion in 2000 to US$1,189 billion by end-2007 – a trend that was accompanied by strong launch activity which more than doubled the size of the North American hedge fund industry. The advent of the global financial crisis proved an anti-climax as AUM declined almost 20% from their 2007 peak to US$963 billion by 2009. While launch activity was far from muted during the crisis years, it was matched by a steep rise in hedge fund liquidations which resulted in a stagnation of the industry’s size. Since then the industry has recovered; aided by strong asset inflows and performance-based gains which occurred against the backdrop of a mild economic recovery in the United States and an increasing demand for hedge fund exposure by investors looking to reduce the volatility of their portfolios.

Figure 1: Industry growth since 2000
 

2010 and 2011 recorded strong asset inflows worth US$116.6 billion into the industry despite increased risk aversion in the markets towards the end of 2011 as the Eurozone crisis came centre stage while the United States lost its AAA credit rating, which then slowed to US$6.7 billion in 2012.

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