The world economy had a shaky start in 2016 with investors flocking to safe haven assets amid a volatile market environment. The global hedge fund industry’s asset base contracted US$20.1 billion as of February 2016 year-to-date, with performance-driven losses a main contributor to this contraction. Performance-based losses stood at US$16.6 billion in the first two months of 2016 alone, while investor outflows of US$3.5 billion were recorded. The assets under management (AUM) of the global hedge fund industry currently stand at US$2.22 trillion, managed by a total of 11390 hedge funds. Going into 2016, further easing seems to be a main theme as central bankers worldwide have largely adopted accommodative monetary policies in an attempt to re-energise the current lethargy of the world economy.
Over the past year, the global hedge fund industry has seen its assets grow by US$108.7 billion, with gains in assets largely attributed to investor allocations seen especially in the second and third quarters of 2015 where investor allocations stood at US$66.4 billion during this period alone. As at end of 2015, investor inflows accounted for US$80.7 billion of the total growth in assets with European hedge funds taking up half of the share of total investor inflows during the year.
Figure 1a: Industry growth over the years
The industry witnessed impressive asset growth in the pre-financial crisis era with AUM tripling within a span of four years since the year 2000. AUM for the global hedge fund industry peaked in 2007 to reach its pre-financial crisis high of US$1.88 trillion, managed by a total of 9,313 hedge funds. By mid-2008, the industry’s asset base grew over US$400 billion to breach the US$1.95 trillion mark; much of this is attributed to strong investor inflows. Between 2007 and mid-2008 alone, investor inflows stood at US$239.9 billion while performance-based gains stood at US$168.4 billion. The financial crisis of 2008 affected the industry’s strength with the global hedge fund industry registering a steep decline of US$413.6 billion in 2008 alone, with redemptions accounting for over half of the losses. Investor redemptions continued in 2009 totalling US$122.9 billion despite excellent performance-based gains of US$131.5 billion during the year.
The full article is available in The Eurekahedge Report accessible to paying subscribers only.
Subscribers may continue to login as usual to download the full report and non-subscribers may email email@example.com to enquire on how to obtain the full research report.