Research

2015 Key Trends in European Hedge Funds

Introduction

The European hedge fund industry has been gaining ground despite the challenging circumstances in the Eurozone region. Given the strong recovery posted by European hedge funds, March 2014 saw the industry’s assets under management (AUM) of US$478.1 billion breach past its October 2007 pre-crisis AUM. The onset of the recent Greek crisis has not deterred AUM growth in the region as AUM continued to climb steadily from 2012 onwards, reaching US$506.8 billion, managed by 4,016 hedge funds in May 2015. On a year-to-date basis, the total AUM of European hedge funds grew US$20.1 billion, largely on the back of performance-based gains which account for roughly two-thirds of the total growth in European AUM in 2015.

In 2000, the European hedge fund industry 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 17.07% in 2008 with AUM declining by 37.9% from their 2007 peak to bottom out at US$293.6 billion by March 2009. Despite regional economic and political turmoil in the Eurozone, the industry has shown increased resilience, with AUM increasing by 54% from their 2008 low to end at US$506.8 billion by May 2015.

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 the 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 US$496.2 billion high in June 2014. Despite seeing redemptions from July 2014 to December 2014, the European hedge fund industry AUM grew by US$32.3 billion in 2014.

 

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