Is the Worst Over for Global Hedge Funds?

Quantitative Update 2009

The international asset management research firm reports in the July "Cerulli Edge--Global Edition," that while it took the hedge fund industry nearly three years to accrue these assets, it took less than six months for most of the money to be exhausted. Cerulli contends that it will take up to five years for the industry to recover those assets.

The damage was not limited to established economies, and the magnitude of the global loss seems to stupefy even the most fervid supporters of the decoupling theory of economic activity. The theory, which states that emerging markets will be less affected than mature markets, seems to have been debunked at least in this case, by the almost biblical breadth of this collapse.

Many industry experts agree, according to the release, that the emerging markets may make a speedier recovery than some established markets but the lesson to be learned here by the nascent players in the game is that unless things are going smoothly in the traditional markets opportunity and expansion into distant markets will be affected. "There's a growing belief, and one that Cerulli supports, that emerging markets in general, and Asia specifically, will see a quicker recovery than the more entrenched developed markets, but it's all relative," said Ken F. Yap, a director at Cerulli Associates, www.cerulli.com.

Taking its findings from the Quantitative Update 2009 into account, Cerulli has adjusted its five-year industry growth forecasts from 7.9% to 5.5%. This proposes that global assets under management will grow to US $56.5 trillion by the end of 2013, only somewhat higher than the US $53 trillion at the end of 2007.

Michael Stanley can be reached at mstanley@sbmedia.com.

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