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