Research

2011 Key Trends in European Hedge Funds

Introduction

After posting strong growth in 2009 and 2010, European hedge funds have faced some challenging times in 2011. The Eurekahedge European Hedge Fund Index was down 5.54%1 November YTD while assets under management (AuM); which had crossed the US$400 billion mark earlier this year, fell back to US$380 billion.2

The region’s hedge fund sector has witnessed significant changes over the last 10 years, going through a cycle of growth and decline, followed by a period of reorganisation and consolidation in the industry. Between 2002 and 2007, European hedge funds underwent exponential growth, both in terms of number of funds and AuM reaching a maximum size of US$472.8 billion by October 2007, with the total number of funds crossing the 3000 mark. The global financial crisis wiped out a significant part of the industry and between January 2008 and March 2009, the assets in European hedge funds declined by nearly 40%.

Figure 1: Industry growth since 2000

By the end of 1Q 2009, the size of the industry had shrunk to US$293.6 billion, due to the combined effects of performance-based losses and widespread redemptions. In the following 12 months...

 

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Footnote

1Based on 30.36% of the funds which have reported November 2011 returns as at 8 December 2011

2For the rest of this report, we will be discussing data as at end-October 2011

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