“Non-top-100″ hedge funds continue to flat-line
May 25th, 2008 | Filed under: Hedge Fund Industry TrendsWhen people talk about how the hedge fund industry growing or shrinking, they are usually referring to hedge funds as a social and media phenomenon, not the more technical definitions such as assets under management.
The result is often a common assumption that starting a hedge fund is easy. For example, people will sometimes be overheard saying “everyone and their dog is starting a hedge fund” or “they’re sprouting up like weeds” or “there are over 10,000 of these funds with new ones being created every day”.
In other words, the media often seems to set the tone more than the actual assets managed by the industry. You’d think that if you golfed with a bunch of hedge fund managers, they’d all be betting thousands of dollars in each hole, drinking champagne and lighting their cigars with twenties.
But (unfortunately for aspiring hedgies) that’s an inaccurate view of the industry as a whole. Last year, we commented on the growing phenomenon of concentration in the hedge fund industry. When the growth of the top 100 hedge funds was removed from last year’s industry size figures, it turned out that the remainder of the industry (99% of the widely assumed 10,000 hedge funds in existence) were actually not growing at all. This, as the media trumpeted how the industry was essentially taking over the world.
Well it appears from this year’s data from Alpha magazine that industry concentration continues unabated (press release). Last year 69% of hedge fund assets were managed by the top 100 firms. This year, 75% of the world’s hedge fund assets were managed by the top 100 firms. According to Alpha, this select group of mega-managers increased assets by $350 billion (from $1 trillion to $1.35 trillion) over the past year.
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