Hennessee: Hedge Fund Industry Grows 27%

Hennessee Group said the hedge fund industry grew 27% from $795 billion to over $1 trillion. Asset growth was the result of positive manager performance (+10%) and new capital inflows (+17%). In addition, the number of hedge funds grew 15%

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Hennessee Group said the hedge fund industry grew 27% from $795 billion to over $1 trillion.

Asset growth was the result of positive manager performance (+10%) and new capital inflows (+17%). In addition, the number of hedge funds grew 15% from 7,000 to 8,050 funds. Since 1987, hedge funds have generated an annualized return of +14.94% with approximately 40% less volatility than the S&P 500 DRI, which returned +11.88% over the same time period, according to the 11th Annual Hennessee Hedge Fund Manager Survey.

“Hennessee Group has been monitoring hedge funds since 1987 and the growth we have experienced indicates that hedge funds have matured to an accepted asset class,” commented E. Lee Hennessee, Managing Principal of Hennessee Group LLC.

The 2005 survey respondents include 752 hedge funds from 155 management companies representing over $238 billion in assets. The Survey excluded CTAs who solely trade futures contracts. The survey also found fund of funds continue to be the fastest growing source of capital for hedge funds, with capital increasing 348% since January 2000 (from $63 billion to $282 billion).

While fund of funds remain the fastest growing source of capital, pensions who invest directly in hedge funds have grown 145% since January 2000 (from $29 billion to $71 billion).

On average, hedge funds turned their portfolio over 3.35 times in 2004, versus only 2.99 times in 2003, indicating increased trading as managers searched for opportunities in a range bound market, 61% of hedge funds are registered with a regulatory agency (NASD, SEC, CFTC), up from 50% the previous year.Hedge fund fees have increased, with 53% of managers charging more than a 1% management fee, versus only 41% last year.

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