By Simon Miller
Global hedge funds saw a slight reduction in assets in 2011 to total $1,902bn (£1,200bn) according to TheCityUK.
Although hedge funds saw a 3% reduction in assets from 2010, the net asset inflows remained positive for the second year running with $70bn increase in new capital-inflow which is set to continue in 2012 thanks to a likely increase in institutional investment.
However, this was offset by a 4.6% performance loss, making it the first year of negative returns in the last three years. According to Hedge Funds 2012, most of the losses came in Q3 when the global equity market fell by around 17%.
The report also found that the number of hedge funds totalled over 9,800 at the end of the year, with new hedge fund launches outpacing fund liquidations for the second year running.
TheCityUK estimated that 42% of global hedge funds’ assets were managed from New York in 2011, down from over 50% a decade earlier. London’s 18% share of global hedge funds’ assets was slightly down on the previous year, but more than double its share ten years ago.
Europe has seen a fall in its share of global industry assets during the year, a result of sovereign debt problems in the region which have contributed to a net outflow of funds.
Meanwhile, Asia is taking on a more important role, although this is more as a source of funds than a location for management. The UK and the US are leading locations for management of Asian hedge fund assets with around a quarter of the total each.
Marko Maslakovic, senior economist at TheCityUK, said: “London remains by far the dominant centre in Europe, managing around 85% of European based assets. The structural advantages which have attracted around 800 hedge funds to London include its local expertise and the proximity of clients and markets. The UK is also a leading centre for hedge fund services such as administration, prime brokerage and custody.”