News & Events

2014 Key Trends in European Hedge Funds

Introduction

The European hedge fund industry continues its recovery amid a difficult market environment with current assets under management (AUM) standing at US$487.9 billion overseen by a population of 3,949 hedge funds. At its peak in October 2007, the European hedge fund industry’s share of global AUM was 24.9% which has since fallen to 22.9%. The total AUM of European hedge funds grew US$33.4 billion in 2014, largely on the back of new investor inflows, and is now 3.2% above its pre-crisis peak in 2007.

In 2000, the European hedge fund industry space had 470 funds managing a total of US$38.6 billion in AUM. Over the course of the next seven years, the industry saw tremendous growth with AUM peaking at US$472.8 billion by October 2007. The onset of the global financial crisis, which was followed by the sovereign debt crisis in the Eurozone periphery, dealt a serious blow to the industry with managers seeing large redemptions and heavy performance based losses – the Eurekahedge European Hedge Fund Index was down 17.4% in 2008 with AUM declining by 37.9% from their 2007 peak to bottom out at US$ 293.6 billion by March 2009. Since then, the industry has shown increased resilience despite the Eurozone crisis and tensions in Ukraine, with AUM increasing by 66.2% from their 2009 low to end at US$487.9 billion by October 2014.

Figure 1: Industry growth since 2000
 

By the end of 2011, the AUM of the European hedge fund industry declined to a low of US$359.8 billion, following a resurgence of debt woes in member EU sovereigns as the crisis intensified amid fears over Greece exiting the Euro. Throughout 2012, industry assets stayed at their lows as crisis continued to put a damper on investor confidence.

The European Central Bank’s stance to keep interest rates low and support the Eurozone’s recovery has restored market confidence to some extent. Following signs of economic recovery in the region, European hedge funds have enjoyed a period of sustained growth starting in 2013 that has expanded their total asset base to a high of US$496.2 billion in June 2014. However, recent growth, employment and inflation figures remains weak despite the ECB ‘pulling all stops’ to stimulate the economy, which has prompted investors to reduce their exposure to the region in the latter half of the year. 

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