May 1, 2007, New York, NY -- The Hennessee Hedge Fund Advisory Group (“Hennessee Group LLC”), an adviser to hedge fund investors, today released the results of the 13th Annual Hennessee Hedge Fund Manager Survey, the industry’s oldest hedge fund manager survey. The survey results indicate that the hedge fund industry grew 26% from $1.223 trillion to $1.535 trillion in 2006.
“Since 2000, industry growth has annualized at a 25% rate,” commented E. Lee Hennessee, Managing Principal of Hennessee Group LLC. “Despite the demise of several funds due to volatility in the energy markets, hedge funds experienced similar growth in 2006 as they have seen throughout the decade.”
Asset growth was the result of positive manager performance (+13%) and new capital inflows (+13%). In addition, the number of hedge funds grew 7% from 8,900 to 9,550 funds. Since 1987, the Hennessee Hedge Fund Index has generated an annualized return of +13.59% (net of fees and expenses) with approximately 43% less volatility than the S&P 500 Index, which returned +9.24% over the same time period.
“Despite the increase in assets and leverage throughout the industry, net exposures continue to remain fairly constant, indicating funds are finding a reasonable amount of short positions. However, we are seeing increased use of derivatives such as credit default swaps and ETF’s, which we feel will become more common as the ability to borrow stocks and bonds declines,” commented Charles Gradante of the Hennessee Group LLC.
Introduced in 1995, the Annual Hennessee Hedge Fund Manager Survey is the oldest and most comprehensive hedge fund industry survey. The 2007 survey respondents include 605 hedge funds from 178 management companies representing over $342 billion in assets. The Survey excluded CTAs who solely trade futures contracts.
Findings from the Survey include:
- Individuals/family offices and fund of funds represent the largest sources of capital for hedge funds, each comprising 32% of total industry assets. Corporations represent 12% of industry assets, while pensions represent 11%, and endowments and foundations represent 13%.
- Hedge funds surveyed had an average long exposure of 109% and short exposure of -62%, indicating a low use of margin.
- Hedge funds surveyed had an average gross exposure (longs plus shorts) of 171%, while net exposure (longs minus shorts) was +47%. Average gross exposure is at the highest level since the introduction of the survey in 1995, indicating more leverage is being used to generate returns.
- 87% of hedge funds are registered with at least one regulatory agency (NASD, SEC, CFTC, State), slightly higher than last year (86%).
The Hennessee Group conducts its Annual Hennessee Hedge Fund Manager Survey to provide insight to the firm’s advisory clients and the investment community as a whole. For details or questions regarding the 13th Annual Hennessee Hedge Fund Manager Survey, please contact Hennessee Group at (212) 857-4400.
To purchase the survey, please click here.
About the Hennessee Group LLC
Hennessee Group LLC is a Registered Investment Adviser that consults direct investors in hedge funds on asset allocation, manager selection, and ongoing monitoring of hedge fund managers. Hennessee Group LLC is not a tracker of hedge funds. The Hennessee Hedge Fund Indices® are for the sole purpose of benchmarking individual hedge fund manager performance. The Hennessee Group does not sell a hedge fund-of-funds product nor does it market individual hedge fund managers. For additional Hennessee Group Press Releases, please visit the Hennessee Group’s website. The Hennessee Group also publishes the Hennessee Hedge Fund Review monthly, which provides a comprehensive hedge fund performance review, statistics, and market analysis; all of which is value added to hedge fund managers and investors alike.
Description of Hennessee Hedge Fund Indices®
The Hennessee Hedge Fund Indices® are calculated from performance data reported to the Hennessee Group by a diversified group of over 1,000 hedge funds. The Hennessee Hedge Fund Index is an equally weighted average of the funds in the Hennessee Hedge Fund Indices®. The funds in the Hennessee Hedge Fund Index are derived from the Hennessee Group’s database of over 3,500 hedge funds and are net of fees and unaudited. Past performance is no guarantee of future returns. ALL RIGHTS RESERVED. This material is for general information only and is not an offer or solicitation to buy or sell any security including any interest in a hedge fund.