Overview of 2010 Key Trends in UCITS III Hedge Funds
The interest among investors for UCITS III hedge funds surged in 2010 and has continued into thestart of 2011. In this report, we monitor the developments in UCITS III hedge funds and touch uponsome of the key aspects of the industry such as location of managers, strategies being employed aswell as looking at some of the main performance trends.The size of the UCITS III hedge fund
industry has grown rapidly both in terms of assets under management and number of funds. As at end-February 2011, we estimate there to be 719 uniquemanagers
with assets of nearly US$200 billion.Figure 1 shows the growth in UCITS III hedge funds in the last three years.
Figure 1: UCITS III hedge fund industry growth over the years
The popularity of alternative investments under the UCITS III framework started to increase from 2007onwards. Against the backdrop of the global credit crunch, the financial crisis and some major financial scandals, investors and regulators demanded greater transparency from hedge funds, better risk management and more regulations. In this situation, funds that follow a proper regulatoryframework have witnessed greater interest from investors.For hedge fund managers, the UCITS III platforms presents an opportunity, not only to meet the newrequirements of existing investors but also to market their abilities to new clientswho havetraditionally not invested in their funds, either due to scepticism about unregulated products or because of internal rules preventing them from investing in such funds. At the same time, theregulations also allow enough flexibility for managersto implement their unique alpha-generatingstrategies after catering to some specific requirements. As such, we have witnessed a number of hedge fund managers developing and actively marketing UCITS III versions of their funds, while a few
In this report, we include funds employing absolute return strategies with a hedge fund like structure.
As opposed to multiple share classes, currency denominations and such like
1800100200300400500600700800Dec-07Jun-08Dec-08Jun-09Dec-09Jun-10Dec-10Feb-11Number of funds (LHS)AuM in US$ billion (RHS)