Hedge Fund Growth Slows In Europe

by Carla Johnson, Investors Offshore, London

27 February 2002

The growth rate of European hedge fund assets under management slowed from an amazing 80% in 1999 to 60% in 2000, but notched up only 40% in 2001 to reach a total $64 billion, according to a survey by trade publication EuroHedge.

Ian Jenkins, EuroHedge's managing editor said that if Europe was in a hedge fund bubble, "you would expect growth rates to be accelerating, not falling. Europe has got a lot of catching up to do before we're even near a bubble; the European hedge fund industry, even after three years of strong growth, remains much smaller than its US counterpart."

EuroHedge surveys 450 European hedge funds twice a year for its report, which says that the source of hedge fund investment remains private banking clients rather than pension funds or insurance companies. "High-net-worth individuals have traditionally been the bedrock of the hedge fund industry, and more than ever they are today," said Mr Jenkins.

According to the report, the majority of hedge fund assets in Europe are held in European long/short equity funds, which have a total of $28 billion under management. Arbitrage funds total $19.5 billion; global equity funds total $8.3 billion; macro funds total $5.2 billion; and fixed income funds total $3 billion.

Returns for long/short equity funds "were not very stellar last year, but it's all relative," Jenkins said. "Compared to equity markets, they did extremely well."

The median performance fund, EuroHedge's measure of performance, for long/short funds was up 1.4% last year. Emerging markets funds performed better, posting returns 20.5% higher than last year. Macro funds were up 6.2%, and fixed income funds were up 9.2%.

Recommended