Research

Overview of 2009 Key Trends in Global Hedge Funds

Introduction

Over the last decade, the global hedge fund industry has undergone exponential growth both in terms of assets under management and number of funds. Hedge fund assets hit their peak in June 2008 at US$1.95 trillion – a seven-fold increase since end-1999 – before declining due to drying-up liquidity, the collapse of some large financial institutions, tumbling equity markets and the resultant spike in risk aversion, which led to widespread redemptions. However, hedge funds turned the corner after March 2009, posting excellent returns as well as attracting capital from April through December 2009 as the global financial markets posted a recovery.

Figure 1 below shows the growth in the number of funds and the assets over the past decade.

Figure 1: Growth of the Global Hedge Fund Industry

Click on the image for an enlarged preview

The start of 2009 saw the global hedge fund sector in the middle of its greatest downturn, with managers facing extraordinary redemption pressures as well as performance-based declines. The heavy withdrawals from hedge funds further translated into greater losses for managers as they were forced to liquidate potentially lucrative positions to meet redemption demands.

However, after hitting a low US$1.29 trillion in April 2009, hedge funds reverted to the growth trend by posting strong performances and gaining significant capital inflows towards the end of 2009 at...

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