The North American hedge fund industry has witnessed some significant trends since year 2000. At the turn of the millennium, the sector accounted for more than 84% of the global hedge fund industry with US$258 billion in assets managed by 1,815 managers. Over the next eight and a half years, the sector witnessed exponential growth with assets under management peaking in June 2008 at US$1.247 trillion – an increase of nearly 500%. The fund population also increased significantly to cross 4,600 funds over the same period.
Figure 1: Industry growth since 2000
However, during the second half of 2008 and early 2009 the industry suffered massive redemptions and significant performance-based losses, causing assets under management to fall to US$849.2 billion by April 2009. This period also witnessed a large number of hedge fund managers closing shop and the number of funds fell to 4,453 funds by end-June 2009. Despite the falling markets and record redemptions, the average North American manager witnessed losses of 9.31% in 2008 which can be seen as a significant outperformance to the underlying markets. The subsequent turnaround in global markets and return of investor confidence set the stage for a remarkable recovery in the North American hedge funds sector.
Excellent performance-based gains and positive net flows in the last three quarters of 2009 were followed by a period of consolidation in 2010 and 1H 2011. North American hedge funds have posted the strongest and most sustained recovery among all hedge fund regions. As at end-May 2011 the assets under management stand at ...