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Eurekahedge May 2010 Key Trends in Funds of Hedge Funds - Abridged

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The May 2010 Eurekahedge Report contains detailed analyses and exclusive insights into the state of the hedge fund industry in recent months up to April through a comprehensive qualitative and quantitative presentation of the industry’s asset flows and performance, with a special feature on key trends in funds of hedge funds.

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									2010 Key Trends in Funds of Hedge Funds
Eurekahedge
May 2010


Introduction

Based on data in the Eurekahedge database, we estimate the current size of the fund of hedge funds sector
to be US$435.7 billion in assets, with 3,124 funds. The current assets under management represent a 17-
fold increase in the size of the industry over the last decade although the sector witnessed considerable
losses towards the end of 2008 and early 2009.

The robust growth in the funds of hedge funds in the 2000–2007 period was fuelled mainly by the increasing
interest in hedge funds among investors, such as pension funds, endowments, trusts and financial
institutions. These investors turned to multi-managers for their expertise in fund selection and asset
allocation while also seeking to diversify away from traditional equity and mutual fund investments.
Furthermore, funds of funds helped investors maintain geographically diversified portfolios without having to
personally conduct extensive due diligences on single managers and also to benefit from consistent returns
and downside protection.

Over the last 18 months, the global fund of hedge funds universe has gone through what can be called a
watershed period for the industry. While the end of 2008 and the start of 2009 was quite brutal for the
managers, marked by widespread redemptions and performance-based losses, the latter part of 2009
through early 2010 has been a period of consolidation for the industry.

Figure 1 illustrates the growth of the industry (assets and number of funds) since 2000.

                                     Figure 1: Industry Growth over the Years




The assets under management declined to a low of US$433 billion in April 2009 before stabilising around...


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