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TOP 50 HEDGE FUNDS: ASSETS UNDER MANAGEMENT GROW BY 18% IN 2001
 

By Antoine Bernheim, Publisher. This article appeared in the February 2002 issue of Hedge Fund News┐.

Last year, for the third year in a row, hedge fund investors handily outperformed the S&P 500. As a result, distribution channels really opened up to hedge funds in 2001 with an unprecedented multiplication of funds of funds created by banking and asset management organizations through private offerings as well as a growing number of structured products and publicly traded vehicles open to retail investors.

In order to make an assessment of the industry's ebbs and flows, we conducted, as we do every year, a confidential survey of what we believe to be the 50 largest hedge funds with current assets of $147 billion. The sample includes 10 substitutions from last year's survey. Ten organizations reported hedge fund assets in excess of $5 billion vs. three five years ago. For the first time in the past five years, no one reported hedge fund assets in excess of $10 billion as several of the super large hedge fund organizations have either shrunk, split-up or disappeared. Nothing illustrates better both the growth in assets and the broadening of the top of the pyramid of the hedge fund world than the following statistics: in 1996, the top 50 hedge funds accounted for $55 billion in assets and the median size among them was $600 million. Today, the total capital they represent has grown by a factor of 2.7 but the median size has reached a record $2.5 billion, a fourfold increase from 1996.

2001 results of the 50 largest hedge funds

2001 Net Return after all Fees

Number of Hedge Funds

Capital @
1/1/02 in
$ million

Capital @ 1/1/01 in
$ million

> 25%

8

24,141

15,835

15% to 25%

8

15,303

9,735

10% to 15%

14

55,251

43,867

0% to 10%

13

31,586

27,602

0% to -10%

4

15,995

17,315

<-10%

3

4,493

9,184

Total

50

146,769

123,538

THE TOP 50 MEDIAN STATISTICS

Median Equity

Median

Return

S&P 500

2001

$2.50B

11.5%

-11.9%

2000

$1.70B

12.5%

-9.1%

1999

$1.90B

32.4%

21%

1998

$1.39B

9.5%

28.6%

1997

$1.27B

20%

33.4%

1996

$0.60B

21%

22.9%

Of the 50 largest hedge funds, 43 were profitable in 2001 and 7 had losses, with returns ranging from -31% to +67%. The median net return to investors was 11.5% and the more meaningful net return weighted by capital at the beginning of 2001 of 8.75%. The 50 largest hedge funds generated aggregate profits of approximately $10.8 billion net to investors and approximately $3.5 billion in incentive fees to managers. Overall, the 50 largest hedge funds delivered significantly higher returns in 2001 than the larger hedge fund universe, the median return of which according to data already available on hedgefundnews.com hovers around 5.5%.

Assets under management among the 50 largest hedge funds grew by 18%, with approximately half of the increase coming from profits and half from net inflows. We estimate that 33 fund management groups out of 50 raised $20 billion in new capital, while 17 fund management groups had net withdrawals of $8 billion. Our survey also indicates that, during 2001, 8 hedge fund groups raised net capital in excess of $1 billion and 8 others between $500 million and $1 billion with the median figure for capital movements amounting to a net inflow equal to approximately 8% of the capital at the beginning of 2001. The supply and demand situation in the hedge fund world has shifted to the benefit of the hedge fund managers who are in a position to pick and chose investors. In addition to favoring strategic investors who can bring ideas and relationships, managers in demand are also paying more attention to the identity and the long-term orientation of their investors. This trend is going against the increasingly "retail" nature of the distribution channels and the expansion of structured products both of which shift the focus toward short-term performance and predictability of returns. More and more institutions are looking to create hedge fund products themselves to satisfy these requirements. u

 
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