The rate of growth in the European hedge fund industry slowed markedly in the first half of this year, according to data compiled by EuroHedge, with the combined total assets of all European hedge funds growing by 9.4% from January 1 to June 30 this year.
The half-yearly survey of industry assets shows that total assets rose from $255 billion at the end of December 2004 to $279 billion at the end of June. That compares with a figure of $216 billion at the same stage last year – giving a year-on-year growth rate of 29%.
By comparison, the European hedge fund industry’s assets grew by 50% in the 12 months to the end of December 2004, having virtually doubled in the 2003 calendar year.
The rate of growth in the first six months of the year is in line with the recent growth rate in the US, as shown in the most recent industry survey in our sister publication Absolute Return. That showed total growth for all US funds with more than $1 billion of assets – which collectively account for nearly two-thirds of all global hedge fund assets – of 9.3%.
While the growth rate may have slowed, the continuing increase in European hedge fund assets should be seen in the context of an industry that has seen its overall asset size almost treble since the start of 2003.
But it also shows the relative maturity of the European and US industries against the more nascent Asian hedge fund industry – where assets grew by almost 30% in the first half of the year, as detailed in the September issue of AsiaHedge.
In forming an overall view of the state of health of the industry, the asset statistics should be taken in conjunction with the new funds survey compiled by EuroHedge in July – which showed that a record number of funds (more than 150) had raised a record volume of assets (at least $13 billion) in the first half of the year.
In terms of individual strategy areas, the biggest loser in the first half of the year was convertible arbitrage – where overall assets fell by 22%. The big winners in terms of asset expansion were in credit (up 37%), event-driven (33%) and emerging markets (35%) – with assets in Asian strategies run out of Europe also growing by 33%.
European equities saw solid growth of around 12%, while the managed futures, global equity and macro categories were all largely unchanged from December in terms of overall asset size.
In terms of manager location, London continues to dominate the European scene – with over 75% of all assets under management in European hedge funds being run from the UK.