Hennessee Group LLC, an adviser to hedge fund investors, estimates that hedge fund industry assets increased by $751 billion in 2009 to $1.96 trillion. To avoid double counting, fund of fund assets are not included in the asset growth analysis but are included as Sources of Capital for managers.
The jump in assets represents a +62% increase since the beginning of 2009 and leaves industry assets at their pre-crisis levels in 2007. Preliminary results indicate that the hedge fund industry experienced net inflows of $448 billion (+37%) in 2009. The amount of inflows ($448 billion) represents the largest inflow of assets in the hedge fund history and is a dramatic reversal compared to the -20% decline in asset flows in 2008 ($399 billion). The remaining $302 billion (+25%) gain in assets was the result of positive performance as the Hennessee Hedge Fund Index jumped +24.6% in 2009, the best annual gain since 1999.
Despite many of the well publicized challenges the industry faced entering 2009, particularly after the Madoff scandal, the industry was able persevere and experienced +37% in new asset growth over the full year period, says Charles Gradante, Co-Founder of Hennessee Group. New assets are coming from the traditional long-only side; in part due to the horrendous losses in 2008 coupled with an improved comfort level with hedge funds for those institutions with 10 or more years experience in hedge funds.
A noteworthy development in our 2009 research is the decline in fund of hedge fund assets and continued rise in direct investor assets, predominantly by pensions, endowments and foundations, says E. Lee Hennessee, Managing Principal of Hennessee Group. A trend we believe that could continue into the future due to lower fees in direct investing and a move to more active fiduciary oversight (UPIA and ERISA).
D.C.