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Portfolio > Alternative Investments > Hedge Funds

US$1 Trillion? New Survey Suggests Hedge Fund Industry Bigger Than Thought

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LONDON (–A new survey of hedge fund administrators suggests the industry could be bigger than anyone thought–upwards of US$1 trillion.

London alternatives publication Alternative Fund Services Review and Happauge, N.Y.-based data firm CorrectNet Inc. conducted the survey of 39 administrators and found that the amount of invested assets those administrators reported were under their administration totaled close to US$1.17 billion among nearly 11,400 hedge funds.

That latest total asset figure was an increase of 60% over the same period in 2003. Some of that increase reflects the addition of nine administrators to the survey participants this year; last year 30 administrators took part. Some of it also may be attributed to the “double counting” of assets belonging to both hedge funds and to funds of funds that invest in those hedge funds, as well as some padding of numbers by firms that include custody or retail assets in their totals.

Nonetheless, officials at Alternative Fund Services Review and CorrectNet say the results show the industry is larger than anyone thought. TASS Research* earlier this year estimated the size of the hedge fund industry at the end of 2003 to be US$750 billion, and that was after taking in an estimated US$51.4 billion in the second half of the year (seePrevious HedgeWorld Story).

More recently, Hedge Fund Research Inc., Chicago, released data that showed investors showered US$22.2 billion on hedge funds in the first quarter of 2004, bringing HFR’s estimated industry size to US$864.7 billion, up 6% from Dec. 31.

According to the Alternative Fund Services Review/CorrectNet survey, existing fund administrators grew their assets under management by an average of 32% over the same period the prior year. The survey also found that the United States leads the world both in terms of the amount of assets managed here and the number of hedge fund managers located here.

Survey results also show that the Cayman Islands leads the world in fund domiciles, with 42% of hedge funds domiciled there. Bermuda claims 11% of fund domiciles and 10% of funds use Luxembourg.

*TASS Research is the information and research unit of Tremont Capital Management Inc., Rye, N.Y., which is a minority investor in and strategic partner of HedgeWorld.

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