WEST PALM BEACH, FL (HEDGECO.NET)- Mainstream investors seeking absolute returns and protection in down markets continue to pour investment assets into hedge funds and other alternative investments.Unlike traditional mutual funds, hedge funds use different strategies in different market environments, such flexibility has enabled them to post gains even in bear markets.
Assets managed by global Hedge Funds added another $15 billion in the fourth quarter of 2003, according to new data from Tass Research, for the year of 2003; hedge funds gained a total of $60 billion. Last year�s inflows were a record for TASS. The previous record was set in 2001, when TASS reported that global hedge funds gained US$31 billion Such dramatic increase brings the total hedge fund assets near $750 billion.
The average hedge fund in the CSFB/Tremont index netted 15.44% in 2003, compared to an average of 3.04 % in 2002. Hedge fund industry experts and market analysts think hedge fund assets could top $850 billion at the end of 2004. Hedge fund tracker, Van Hedge Fund Advisors estimated there were over 7,000 hedge funds at the end of 2003, more than twice as many as five years ago.
According to Stephen Jupp of Tass Research, the gains represent a coming of age for the hedge fund industry; many institutional investors have started to sink large sums into alternative investments. Jupp said, �Hedge funds have gotten to the point where [managers] have jumped through the hoops institutional investors require, there is more risk transparency and due-diligence,� he added. Robert Schulman, co-CEO of Tremont Capital Management Inc. explained that institutional investors were the main contributors to the growth in 2003. �They have adopted hedge funds as a viable asset class,� he added.
In an effort to better diversify, an increasing number of institutional investors with huge asset bases are embracing alternative investment strategies According to published reports, Harvard University’s endowment has 12% of its assets in hedge funds. Calpers, the nation’s largest public pension fund, has $1 billion allocated to hedge funds and is considering increasing that exposure. “They view hedge funds as downside insurance,” says George Van, chairman of Van Hedge Fund Advisors. This extraordinary asset growth in hedge funds was also fuelled by new fund launches, as well as a 4% decrease in the closure of funds. In 2002, in its own estimate, Tass Research puts the number of hedge funds near 6,000. Of this number 1,250 were fund-of-funds. However, in 2003, that number grew to about 6,700, and the number of fund of funds reached 1,700.
During the third quarter, the most attractive strategies according to TASS were long/short equity, event-driven, convertible arbitrage, global macro, managed futures, fixed-income arbitrage, emerging markets and multi-strategy funds. This is the first time that multi strategy has gained more that $1 billion in assets in one quarter, since TASS began gathering such data. TASS Research will release detailed figures in February showing industry gains by strategy and regions.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
editor@hedgeco.net
