Database Study Debunks Survivorship-Bias Myth, Showcases Industry Growth

SFS estimates that both single-manager hedge funds and funds of funds are launching at an increasing rate and notes that new funds generally do not appear on databases immediately. It’s also thought that many hedge funds report only to a single database, which means that serious investors need to use multiple data sources for their hedge fund screening and analysis.

The number of hedge funds and their proliferation was not surprising to Ms. Jones, she said, although she was quick to say that it’s hard to assign a definitive size to the industry. The most surprising figure was that assets under management for single hedge funds totals US$1.5 trillion. That’s 50% greater than the most commonly heard estimates of a total approaching US$1 trillion. The survey also found that about 175 funds manage more than US$1 billion or more each.

SFS also found that a majority of hedge funds manage less than US$25 million each. If that finding is an accurate reflection of the industry, it would indicate that there could be a large number of managers who would not be required to register as investment advisers with the U.S. Securities and Exchange Commission when the SEC’s finalized regulation is in place. At the same time, a number of those smaller funds may be under the same roof, meaning that some of those managers might actually have more in assets under management.

This is the second time SFS has completed such a study, which looked at the database constituents as of mid-year 2004. The research is part of an ongoing effort by the firm to provide aggregate investment information to their clients and the general public.

The firm has stepped up its alternative investment database constituents, most recently adding Alternative Asset Center’s database to its stable .

Contact Bob Keane with questions or comments at: [email protected].