Sizing the 2010 Hedge Fund Universe: A PerTrac Study. April th Annual Update

Transcription

1 Sizing the 2010 Hedge Fund Universe: A PerTrac Study April th Annual Update Abstract Sizing the 2010 Hedge Fund Universe: A PerTrac Study is based on an aggregation methodology of ten of the world s leading alternative investment fund databases. The data analysis uses various analytical and statistical methods available in PerTrac Analytics to yield aggregate information on the hedge fund universe. PerTrac produces this report as part of its ongoing effort to provide high quality aggregate investment information to PerTrac clients and the general investment community PerTrac Page 1

2 Table of Contents Table of Contents Introduction Study Methodology And Data Sources Key Findings On Composition & Size Of The Hedge Fund Industry Key Findings On Database Reporting Trends Conclusion PerTrac Page 2

3 1. Introduction Sizing the 2010 Hedge Fund Universe: A PerTrac Study is the eighth annual version of PerTrac s widelyfollowed analysis of the composition and size of the hedge fund industry. Consistent with the methodology used in prior studies, the 2010 study was produced by aggregating data from ten of the largest global alternative investment databases utilizing the capabilities of PerTrac Analytics, the global leader for investment analysis and asset allocation software. The study analyzes fund size and type with respect to the number of distinct funds reporting information to databases, as well as the assets under management (AUM) and domicile of these funds. Industry views are disaggregated by type of fund: single manager funds, funds of funds and commodity trading advisors (CTAs). The study also comments on the reporting trends of funds to the information industry PerTrac Page 3

4 2. Study Methodology And Data Sources Ten leading global databases were included in PerTrac s research including: (1) Altvest (now part of Morningstar Hedge Fund Database), (2) Barclay Hedge Fund Database, (3) Barclay CTA Database, (4) CogentHedge, (5) Eurekahedge Global Hedge Fund Database, (6) Eurekahedge Global Fund of Funds Database, (7) HedgeFund.net, (8) Hedge Fund Research, (9) Lipper TASS, and (10) Morningstar Hedge Fund Database. Funds report their performance information to databases at the share class level. This is done to account for varying performance (and fees) for each share class. We identify, where applicable, both share class and fund level data totals in this study. Fund level data in this study is the roll up of the identified share classes for each fund. As many of these databases contain records on the same funds, combining the databases introduces duplicate data. In order to accurately assess size of the hedge fund industry it is necessary to scrub the data. Duplicate records for single manager funds, CTAs and funds of funds were tagged based on the analytical and statistical structures available in PerTrac Analytics using the PerTrac ID. These duplicate records were then eliminated. A single instance of these records was retained in our study to create a holistic industry list. To compare and size the industry in a single currency, all funds that were not denominated in US Dollars (primarily non US domiciled funds), were converted to US Dollars using the exchange rate valid on December 31, PerTrac Page 4

5 3. Key Findings On Composition & Size Of The Hedge Fund Industry The 2010 study identified over 55,600 fund share class records, including single manager hedge funds, CTAs and funds of funds, across all databases. These represent 23,603 unique, unduplicated fund share classes. For comparison, 48,723 total fund class records were found in 2009 which represented 21,684 unique, unduplicated fund share classes. From 2009 to 2010 there was 14% growth in the gross number fund share class records and 9% growth in the number of unique, unduplicated fund share classes. Funds appear to be reporting to more databases, perhaps in an effort to market themselves more broadly with greater market coverage, or to provide more disclosure in this era of increased transparency. When share classes for the same fund are consolidated to the fund level, the study identified 12,768 unique hedge funds and funds of funds and 1,997 CTAs in Other key findings and observations include: Number Of Funds Reporting Among the 23,603 distinct fund share classes, approximately 22,774, or 96.5% of funds, reported data in 2010 vs. 85% in Domicile & Currency Consistent with 2009, in 2010 approximately 70% of all funds were domiciled outside of the US. 97% of non US domiciled funds reported data in 2010, up significantly from 86% in US domiciled funds experienced similar increases with 93% of funds reporting data in 2010 vs. 82% in This increase indicates a greater disclosure by the funds of their information. Funds are primarily denominated in four currencies (USD, EUR, GBP, and CHF) followed by Japanese Yen, Chinese Yuan and Brazilian Real. Approximately 80% of funds are denominated in US Dollars and Euros. Observations Specific To Single Manager Funds In 2010, 16,328 single manager hedge fund share classes were identified up from 14,630 in Rolled up to the fund level, this represents 9,572 single manager hedge funds. Funds when measured by share class returned to levels greater than A greater number of single managers reported performance in 2010 than in recent prior years with 95% of distinct funds reporting performance in 2010 compared to 83% in 2009 and 87% in % of single manager hedge funds are US domiciled in 2010 slightly higher than the 2009 figure of 29% but still around a third on a year over year comparison. Observations Specific To Funds Of Funds: Approximately 7,274 funds of funds share classes were identified in This compares to 7,055 in 2009 and 7,194 in Rolled up to the fund level, the total number of funds of funds was 3,196 in The number of funds of funds is now at about the same level as in Similar to single manager funds, the percentage of funds of funds reporting performance data increased in 2010 with 98% providing information compared to 89% in 2009 and 94% in % of funds of funds are US domiciled PerTrac Page 5

6 Observations Specific To CTAs And Other Fund Entities: 1,997 CTA entities were identified in 2010 while the number of CTAs in 2009 was 2, represents a return to the same numbers of CTAs as in The increase in the number of CTAs in 2009 may have reflected investor perception of CTAs as less risky than single manager funds after the 2008 market corrections. The decrease in the number of CTA entities in 2010 may reflect a more sustainable level in the number of CTAs. 5,278 distinct fund management companies (e.g., general partners) were counted in 2010, which is similar to the prior year s count at 5,000. Related fund management companies (subsidiaries, etc.), where identifiable as such, were counted as a single fund company PerTrac Page 6

7 3.1. Single Manager Funds: AUM Grew To $1.6 Trillion, A Healthy Growth Near 11% Single manager funds in the databases account for approximately $1.6 trillion AUM. This is approximately an 11% increase over 2009, but still below the high water mark at the end of 2007, when AUM reached $2 trillion. 280 single manager funds held assets in excess of $1 billion, slightly more than existed in 2009 (Chart 1). Number of Funds 4,000 3,763 Chart 1: AUM in Single Manager Hedge Funds (2010) 3,500 3,000 2,500 2,000 1,500 1, <$25M 1,166 $25 - $50M 1,025 $51 - $100M 1,058 $101 - $250M 519 $251 - $500M 344 $501M to $1B 240 $1B - $5B 40 >$5B Source: PerTrac 2011 Assets Under Management Note: This excludes 1,417 funds that did not report AUM. Exchange rate calculated at 12/31/ PerTrac Page 7

8 In a further breakdown of single manager funds, almost half of all reporting funds manage less than $25 million (Charts 1 and 2). The distribution of funds by asset size largely mirrors the distribution in 2009, with 73% of funds reporting AUM of less than $100 million, compared to 79% in Chart 2: Breakdown Of Single Manager Funds By Size Of AUM (2010) 5.2% 2.7% 11.6% 12.9% 13.9% 52.1% 0.2% 1.6% 2.9% 4.2% 6.4% 13.0% 12.6% 14.3% 46.1% 0.5% >$5B $1B - $5B $501M to $1B $251 - $500M $101 - $250M $51 - $100M $25 - $50M <$25M 2009 Source: PerTrac PerTrac Page 8

9 3.2. Funds Of Funds: AUM Decreased To $518 Billion, A Decrease Of 10.5% Approximately $518 billion was invested into hedge funds through funds of funds in This represents a 10.5% decline in assets managed through fund of funds vehicles from 2009 and a decrease of 31% from 2008 when $750 billion in assets was reported. Approximately 3,196 funds of funds were identified in the analysis using PerTrac Analytics. Of these, 3,127 (98%) had reported performance numbers to databases in Chart 3: AUM In Funds Of Funds (2010) Number of Funds 1,186 1,200 1,100 1, <$25M $25 - $50M $51 - $100M $101 - $250M 182 $251 - $500M 150 $501M to $1B 99 $1B - $5B 9 >$5B Source: PerTrac 2011 Assets Under Management Note: This excludes 336 fund level Funds of funds that did not report AUM. Exchange rate is calculated at 12/31/ PerTrac Page 9

10 Similar to single manager funds, of those funds of funds that report AUM, a large percentage of funds of funds are small, with close to 42% of reporting fund sizes with less than $25 million AUM and 70% managing AUM of less than $100 million saw a decrease in the share of smaller funds, with the share of funds with $25 million or less AUM decreasing by 9%. Chart 4: Breakdown Of Funds Of Funds By Size Of AUM (2010) 5.1% 2.8% 11.5% 13.1% 15.0% 50.7% 0.1% 1.7% 3.5% 5.3% 6.4% 14.4% 14.6% 14.0% 41.5% 0.3% >$5B $1B - $5B $501M to $1B $251 - $500M $101 - $250M $51 - $100M $25 - $50M <$25M 2009 Source: PerTrac CTAs: AUM Now Stands At $234 billion In analyzing the type of funds among the 23,603 distinct hedge funds and funds of funds identified in the study, approximately 1,997 share classes can be categorized as CTAs or Managed Futures investment vehicles. These funds or investment programs typically trade mainly futures and currencies. Reported assets among these investments totaled approximately $234 billion. CTA counts decreased from 2,425 in 2009 to 1,997 in New Fund Launches In % Higher Than 2009 The number of new fund launches of single manager funds for 2009 was 783. New fund launches are counted in their calendar year based on the start date of the first month of published performance data to the information provider. There is often a considerable lag in the ability to aggregate this data across all funds. Preliminary data for 2010 shows a 51% increase in new fund launches from 2009 with 1,184 new launches in Preliminary fund of fund launches in 2010 also showed an increase from 2009 final figures at 352 in 2010 vs. 304 in This figure can be used as a momentum indicator for the overall growth and health of the industry PerTrac Page 10

11 3.5. Funds Of Funds More Likely To Be Domiciled Offshore For both single manager and funds of funds (Charts 5 and 6), the portion of funds domiciled outside of the US has remained relatively steady from 2009 to In both 2009 and 2010 funds of funds were more likely to be offshore than were single manager funds. Chart 5: Number Of Single Manager Funds By Domicile ( ) US 29.7% 32.9% Non-US 70.3% 67.1% 2009 Source: PerTrac Chart 6: Number Of Funds Of Funds By Domicile ( ) US 12.6% 17.5% Non-US 87.4% 82.5% 2009 Source: PerTrac PerTrac Page 11

12 4. Key Findings On Database Reporting Trends 4.1 Funds Reporting To Third Party Information Providers As mentioned previously in this report, in 2010 a greater percentage of both single manager funds and funds of funds reported information to the databases. In 2009, funds may have stopped reporting to databases for a variety of reasons, among them poor performance, personnel changes, hard closes, soft closes and business failure. With the market crisis receding into the past, the percentage of funds reporting rose to 95% of all funds in 2010 compared to 85% in For single manager funds, the number of 16,328 distinct entities also represents a higher actual number of funds providing information to databases, even higher than in 2008 where the number of reporting funds was 13,439. With a greater breadth of funds reporting information to third party information providers, the value and relevance of databases to investors is increasing. Investors looking for managers to place their assets with are able to analyze across and select from a wider variety of funds than ever before. 4.2 Approximately 47% Of All Funds Report To Only One Third party Information Source; Requiring Investors To Use More Than One Database To Ensure Appropriate Coverage Of Single Managers As with past analyses, this PerTrac study finds that funds continue to be selective in reporting to thirdparty information providers. Approximately 47% of the funds in the study were present in only one out of the ten databases (Chart 7). Since more than 70% of funds reported to three or fewer third party providers in 2010, any one database provides only a sample of the overall hedge fund universe, requiring investors to access multiple data sources to obtain a broad view of the available investment opportunities. The study found that any investment manager looking to research funds for investment searches, peer group analysis, or other research, can significantly increase the total number of funds available by adding just one additional data source. It would appear that purchasing multiple databases continues to be a cost effective method of increasing an investor s coverage without expending a lot of time or capital. Chart 7: Breakdown Of The Number Of Databases Reported To By Hedge Funds And Funds Of Funds 0.0% 0.2% 4.9% 3.2% 0.0% 4.4% 5.3% 6.4% 5.3% 5.8% 7.2% 6.4% 5.5% 9.6% 8.5% 15.9% 16.7% 47.6% 47.1% 0.0% Source: PerTrac PerTrac Page 12

13 5. Conclusion 2010 represented a very positive year for single manager funds they increased in both number of distinct funds and overall AUM. The perceived value of hedge funds in terms of their ability to provide returns for investors appears to have resurfaced, and investors increased their allocations to singlemanager funds. For the funds of funds industry, the story is more mixed. The AUM by these funds decreased. On average, funds of funds are small with only 108 funds of funds reporting AUM of greater than $1 billion and almost 42% with AUM of less than $25 million and 70% reporting less than $100 million AUM. Although there was a general increase in the percentage of funds reporting data in 2010, we did not see a real increase in the number of industry participants reporting information to more than one database. So more funds realize they need to report due to disclosure imperatives but reporting once may be enough to satisfy the transparency mandate for marketing, benchmarking, audit and exposure purposes PerTrac Page 13

14 About: Sizing the 2010 Hedge Fund Universe: A PerTrac Study Sizing the 2010 Hedge Fund Universe: A PerTrac Study is part of an ongoing focus on providing high quality aggregate investment information to PerTrac clients and the general investment community. The study was completed using the PerTrac ID feature in PerTrac Analytics. PerTrac IDs allow users to combine two or more databases from different data vendors and easily create a universe of unique funds, hiding duplicate records based upon the users chosen data vendor priority. PerTrac users gain the benefit of having multiple databases and a larger data sample without having to manually identify duplicate records. Users are also able to toggle between data sources to access the full complement of information available on each fund, which often varies between data vendors even when the same fund is referenced. About PerTrac PerTrac provides sophisticated analytics, reporting and communications software and services for investment professionals, including pensions, family offices, hedge funds, long only managers, endowments, sovereign wealth funds, funds of funds and industry service providers. More than 1,400 organizations in 50 countries rely on PerTrac software solutions to help them maximize returns, reduce risk and operate more efficiently. Our solutions include: PerTrac Analytics for investment analysis and asset allocation; PerTrac CMS for managing research, communications and due diligence, and PerTrac Portfolio for handling multimanager hedge fund portfolios. PerTrac is a private, equity owned growth company that has been partnering with clients from almost every corner of the alternative and traditional fund investment community since The company is headquartered in New York with offices in London, Hong Kong, Tokyo, Reno and Memphis. For more information, please visit PerTrac Page 14