Single Manager Hedge Fund Assets Top $1.7 Trillion

by Phillip Morton, Investors Offshore.com

14 August 2006

Money inflows in the second quarter of 2006 have pushed the total amount of assets in single manager hedge funds to more than $1.7 trillion.

According to estimates by Hedgefund.net (HFN), a leading source for hedge fund news and information owned by Channel Capital Group, single manager hedge fund asset levels increased 3.98%, from $1.66 to $1.72 trillion in the second quarter helped by a $74 billion increase in new assets - the second largest inflow since the first quarter of 2005.

Meanwhile fund of fund assets increased 4.39% to an estimated $860 billion.

Negative performance returns resulted in a drawdown of just over $8 billion, largely the result of volatile equity and commodity markets, HFN said. However, strong performance from the second half of 2005 and the first quarter of 2006 spurred allocations.

There was an increase in new allocations across all strategies, except short biased funds which despite performance gains had a net outflow of assets from existing funds of $65 million. Funds employing long/short strategies had the highest inflow of new assets, an estimated $28 billion followed by market neutral equity funds raking in just over $11 billion in new assets.

A few strategies saw their total asset levels drop for the first time in almost two years. The large sell-offs in emerging markets during May and June resulted in EM funds losing an estimated $4.5 billion and dropping overall asset levels 0.84% after seven straight quarters of double digit growth.

In other areas: convertible arbitrage fund assets increased $1.8 billion, (4.44%), which included $1.4 billion in new inflows; macro fund assets rose $4.24 billion, (3.82%), which included $4.9 billion in new inflows; funds employing options strategies had their highest increase in assets since the fourth quarter of 2004 rising $1.2 billion, (7.57%), just over $1 billion of which were new assets; distressed managers continued to have steady asset gains with a net increase of $6.7 billion, (6.47%), $6.1 billion of which were new assets.

The notable decreases were: funds investing in Asia, which lost a total of $2.4 billion, (1.75%) from the first quarter, despite an increase in new assets of $3.8 billion; emerging market equity funds, which lost $2.98 billion, (4.43%), including a net redemption of assets of $300 million; and long only funds, which lost $3.65 billion or an asset drain of (3.78%) from the first quarter despite net new asset inflows of $645 million.

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