Number of hedge funds up by two thirds in two years, concludes PerTrac study

Software provider PerTrac Financial Solutions says that the number of hedge funds listed  in databases it tracks have increased by nearly two thirds since it last looked at the market in detail in 2005.

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provider PerTrac Financial Solutions says that the

number of hedge funds listed  in

databases it tracks have increased by nearly two thirds since it last looked at

the market in detail in 2005.

According to the 2006 PerTrac Hedge Fund Database Study, there was a 61% increase in

hedge funds and funds of hedge funds in hedge fund databases since the 2005 study.

“Investors and industry watchers will be

interested to learn that the number of distinct hedge funds and funds of hedge

funds we were able to identify in hedge fund databases in 2006, with duplicate

funds removed, increased by 61% from the prior year,” says Meredith Jones,

Managing Director of PerTrac.  “The

number of single manager hedge funds increased by 68%, while the number of

funds of hedge funds increased by 46%.”

The study, released annually since 2003,

has become a widely-followed indicator of the size and composition of the hedge

fund industry.  The 2006 study was

conducted using data from twelve major hedge fund databases. The data is then

combined with the PerTrac Analytical Platform, an investment analysis and asset

allocation software application, and analysed.

This is the first year that the study used

PerTrac IDs, a code that is unique to each hedge fund, fund of funds and share

class. PerTrac IDs, released in version 6.19 of the PerTrac Analytical

Platform, allow users combining two or more databases from different data

vendors to easily create a universe of unique funds, based on the PerTrac ID,

hiding duplicate records based upon the users’ chosen data vendor


PerTrac says subscribers thereby gain the

benefit of having multiple databases and a larger data sample without having to

manually identify duplicate records.  The

firm says they  can also easily toggle

between data sources to access the full complement of information available on

each fund, which often varies between data vendors even when the same fund is



2006 PerTrac Fund Database Study found a

total of over 56,000 investment records across all databases, including both

single manager hedge funds and funds of hedge funds (FOFs).  Records are the total number of funds in all

databases including all duplicate fund records. This total represents a jump of

more than 15,000 records from last year. 

This more than 36% growth in hedge fund listings is due not only to

growth in the number of existing hedge funds but also to further strides among

databases in data collection and coverage of the hedge fund universe.

Within the overall collection of more than

56,000 records, the PerTrac Analytical Platform revealed approximately 19,800

“distinct” hedge fund and fund of funds investments among the various hedge

fund databases once duplicate records were removed. This figure counts

individual classes within funds as distinct investments.

Other key findings include: 

  • Over 15,400 distinct funds reported performance data in 2006.

  • Nearly 13,675 single manager hedge funds were identified, as

    well as approximately 6,100 FOFs. 

    This compares with 8,100 single managers and 4,150 FOFs identified

    in the 2005 study.

  • Nearly 4,900 distinct fund managers (general partners) were

    counted. Related fund management companies (subsidiaries, etc.), where

    identifiable as such, were counted as a single fund manager. This compares

    with approximately 3,500 general partners that were identified in 2005.

  • Of the single manager hedge funds, approximately 10,200

    reported performance in 2006. Of those, approximately 35% were onshore

    funds and 65% were offshore.

  • About 36% of identified single manager funds were domiciled

    onshore (in the United

    States) while about 64% were domiciled

    offshore. Among FOFs, approximately 18% were domiciled onshore while 82%

    were offshore.


Single manager funds in the databases

account for over USD 1.41 trillion under management.  Approximately 250 funds have surpassed the

USD 1 billion mark. Meanwhile, over one-third of single manager funds continue

to manage less than USD 25 million (see chart). 

Approximately 4,150 of the single manager

funds appear to be ‘clones’ of another fund, meaning that they trade pari

passu, either as offshore funds, super-accredited (3(c)7) funds or separate

share classes (usually differing in currency denomination) of a single fund



There were approximately 6,100 different

FOFs that appeared in the study, and nearly 5,250 had reported performance

numbers in 2006. Of those FOFs which had reported last year, about 16% were

domiciled onshore and 84% were offshore. There appears to be about USD 700

billion invested into hedge funds through FOFs, although just over a quarter of

them manage less than USD 25 million.



Among the 19,800 distinct investments

identified in the study, approximately 1,400 of them appear to be managed by

Commodity Trading Advisors (CTAs). These managers’ funds or investment programs

typically trade mainly futures and currencies. Reported assets among these

investments totaled approximately USD 150 billion.

“As with prior years’ studies, PerTrac

noted significant overlap between the various databases,” says Jones. “However,

as the graph below shows, despite overlap between and widespread growth among

the databases, relatively few hedge funds and fund of hedge funds report to

more than two or three databases, and almost none report to all twelve

databases. In fact, a significant number of hedge funds and FOFs, more than

5,000 in the twelve-database sample, appeared only in a single database. This

averages out to about 475 “exclusive” funds in each database, underscoring the

importance of accessing multiple data sources when conducting serious hedge

fund screening and analysis. No single hedge fund database covers even half of

the identified distinct investments. It is therefore necessary for savvy hedge

fund investors, looking for the most comprehensive data sample on which to base

their investment and asset allocation decisions, to subscribe to more than one

database to achieve the most substantial coverage.”



The number of new single manager hedge fund

launches has continued to increase over the past few years, but the rate of

increase has fallen off somewhat since the beginning of the decade. Just over

2,000 single manager hedge funds started in 2005, an increase of more than 100

from the year before.

Launches of new FOFs, on the other hand,

continued to show a marked increase each year since 2000, with the notable

exception of 2005. The number of FOF launches fell off from nearly 1,100 in

2004 to approximately 850 in 2005.

“We’ve noted that consolidation has been

the major theme among FOFs in 2006,” says Jones. “Established funds of hedge

funds seem to be getting the benefit of asset inflows, perhaps compressing the

growth and launch of newer FOFs.”

(Pertrac says figures for 2006 fund

launches are not considered reliable indicators and are not disclosed here

because many newly launched funds do not begin reporting to databases prior to

their one year anniversary.)



*Numbers of new

funds have not been adjusted to account for survivor bias.



*Numbers of new

funds have not been adjusted to account for survivor bias.

The databases included in the study were

Alternative Asset Center (acquired by Barclay in mid-2006), Barclay’s Global

HedgeSource, CISDM, CogentHedge, Eurekahedge Absolute Return Funds Database,

Eurekahedge Global Fund of Funds Database, Eurekahedge Global Hedge Funds

Database, from Channel Capital Group, Hedge Fund Research,

Lipper/TASS, Morningstar Altvest, and the MSCI Hedge Fund Indices. The study

tagged duplicate fund records, CTAs, funds of funds and clone funds using

various analytical and statistical methods, and the data was manipulated in a

number of ways to yield aggregate information on the hedge fund universe.


PerTrac Hedge Fund Database Study will be

conducted  on an annual basis.

PerTrac Financial Solutions, founded in

1996, provides asset allocation and investment analysis software. Its PerTrac

Analytical Platform is used by more than 1,700 clients in 45 countries,

including banks, brokerage firms, consultants, plan sponsors, family offices,

investment managers and funds of funds. PerTrac CMS, which was part of its

January 2006 acquisition of Whittaker Garnier, is the other major application

owned by the firm., It is a contact and information management system, used by

more than 250 alternative investment firms around the world. PerTrac Financial

Solutions is headquartered in New York with

offices in London, Hong Kong, Reno,

Memphis and Tokyo.