Research

2010 Key Trends in European Hedge Funds

Introduction

While the European headlines in 2010 have been dominated by woeful tales of sovereign debt issues, the region’s hedge funds have been delivering their mandated results by providing superior downturn protection and outperforming the underlying markets. The Eurekahedge European Hedge Fund Index is up 0.25% June YTD while the MSCI Europe Index has lost 8.56% over the same time.

Currently, the size of the industry stands at US$340 billion, managed by a total of 3,401 funds. Figure 1 shows the growth trend in European hedge funds since December 1999.

Figure 1: Industry Growth over the Years


The last 12 months have witnessed some remarkable movements in the European hedge fund industry. 2H2009 was marked by hefty asset flows as well as strong performances – the average European hedge fund returned 10% during this time. However, the start of 2010 marked yet another change in fortunes for the sector, with performance-based gains slowing down and asset flows turning negative. Concerns over the sovereign debt situation in Europe have dominated the markets, increasing risk aversion and leading to heightened volatility. Given the fickle nature of the markets in 1H2010, European managers have displayed a notable ability to...


 

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