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Eurekahedge February 2011 Global Hedge Funds Key Trends - Abridged

Eurekahedge February 2011 Global Hedge Funds Key Trends - Abridged

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The global hedge fund sector witnessed excellent performance-based growth in 2010. The Eurekahedge Hedge Fund Index was up 10.99% in 2010 while the S&P 500 gained 12.78% over the same period. The sector has attracted significant capital and has seen numerous changes over the last few years in terms of strategies, fund sizes, fee structures and service provider landscape.
The global hedge fund sector witnessed excellent performance-based growth in 2010. The Eurekahedge Hedge Fund Index was up 10.99% in 2010 while the S&P 500 gained 12.78% over the same period. The sector has attracted significant capital and has seen numerous changes over the last few years in terms of strategies, fund sizes, fee structures and service provider landscape.

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Published by: Eurekahedge on Mar 28, 2011
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Overview of 2010 Key Trends in Global Hedge Funds

Eurekahedge February 2011

Introduction The global hedge fund sector continued its robust recovery from the global financial crisis throughout 2010. The industry has witnessed strong inflows since the second quarter of 2009, while hedge funds across all regions and strategies delivered positive returns for 2009 and 2010, with some indices posting record gains during this period. The Eurekahedge Hedge Fund Index was up 10.99% in 2010. Since the start of the last decade, the global hedge fund space has seen some remarkable trends. At the start of 2000, total industry assets stood at US$277 billion and over the next seven years, the sector witnessed tremendous growth to reach US$1.95 trillion, a seven-fold increase. However, the growth trend reversed in 2008 amid the credit crunch, collapse of large financial institutions, highprofile frauds and the subsequent financial crisis. The drying up of liquidity, heightened risk aversion and resultant widespread redemptions culminated in the worst yearly performance for the industry – the Eurekahedge Hedge Fund Index lost 10.91% in 2008. Additionally, performance-based losses led to further negative asset flows, which resulted in greater losses, as managers were forced to sell potentially winning positions. The industry reached its nadir in April 2009, with assets under management falling to US$1.29 trillion – a drawdown of 33%. Figure 1 shows the growth in the number of hedge funds and assets since 1998. Figure 1a: Industry growth over the years
10,000 9,000 8,000
Number of funds

2,000 1,800 1,600 1,400 1,200 1,000 800 600
AuM (US$ billion)

7,000 6,000 5,000 4,000 3,000

2,000
1,000 0
1999 2000 2001 2002 2003 2006 2007 2008 2009
2004 2005

400
200 0
Dec-10
www.eurekahedge.com

Number of funds Source: Eurekahedge

AuM (US$ billion)

1

| February 2011

Figure 1b: AuM Growth in recent months
1,750 AuM (US$ billion) 1,650 1,550 1,450 1,350 1,250 Apr-09 Apr-10 Jul-09 Jan-09

Oct-09

Jan-10

Jul-10

AuM (US$ billion)

Source: Eurekahedge

After exhibiting a strong recovery in the April-December 2009 period, managers witnessed...

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Oct-10

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