Hedge Fund Intelligence, publishers of several leading hedge fund periodicals, published a sneak peek at their 2008 Industry growth estimates last week.  With a press release entitled “Global Hedge Fund Assets Drop More Than 30% in 2008 to $1.8 Trillion”, you can bet that the mainstream media took a dim view of the state of the industry.  Hedge fund assets “took a beating“, closures were “up sharply“, leading to a “great hedge fund contraction“.

But a closer read of HFI’s press release reveals the following more hopeful signs for the industry:

“Already, however, there are indications that many end-investors plan to increase their allocations to hedge funds this year – given that hedge fund performance, while negative in 2008, has continued to be significantly better than the returns from most other investments…”

“Neil Wilson, editorial director of HedgeFund Intelligence, commented: “Despite what was undoubtedly a very difficult year, the overall performance from hedge funds in 2008 was still much better than in equity markets and most other asset classes, and there were many individual funds that delivered excellent (and positive) risk-adjusted returns. And despite some further redemptions already in the pipeline, with the outlook for global markets still looking uncertain it seems to us that investors will increasingly conclude that many hedge funds will offer better ways to invest money and manage risk than the other alternatives. Performance in the early part of 2009 has already been encouraging – despite the difficult markets.”

Industry Size

Once again, the voluntary nature of hedge fund database reporting and the lack of a standard definition of “hedge fund” has yielded some wildly different YE2008 industry size estimates: More…