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 Hed5.ge 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%
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, HedgeFund.net 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.