Hedge fund industry assets increased by $139 billion in 2004 to $934 billion. Likewise, the number of managers in the hedge fund industry increased to 8,050 from 7,000. The increase in assets is equivalent to 17% over the whole of 2004. Or so suggest the preliminary results of the annual survey of the industry by Hennessee Group, an adviser to hedge fund investors.
Hennessee says preliminary results indicate that the hedge fund industry enjoyed inflows of $75 billion in 2004. The remaining $64 billion of the increase was the result of positive performance, as measured by the Hennessee Hedge Fund Index, which advanced +8.27% in 2004.
In comparison, most estimates are for $180 billion in equity mutual fund inflows in 2004, up from $152 billion in 2003. According to the Investment Company Institute, mutual funds currently manage $7.9 trillion.
“While hedge funds continued to gain interest from investors, a comparison between hedge fund and mutual fund assets reveals that hedge funds represent only a small share of the market,” says Charles Gradante, managing principal of the Hennessee Group. “On the margin, hedge funds can make a difference with or without leverage. But with hedge funds approaching $1 trillion in invested assets and mutual funds nearing $8 trillion, it is mutual fund inflows and outflows that should be regularly highlighted as moving the broad markets, as they did in our last bear market when mutual funds experienced heavy redemptions.”