Hedge Fund Industry Grew 21% in 2006

A new survey of the US hedge fund industry found it has grown 21% to $1.22 trillion this year.

A news release from the Hennessee Hedge Fund Advisory Group about its 12th Annual Hennessee Hedge Fund Manager Survey found that asset growth over the year was the result of positive manager performance (+11%) and new capital inflows (+10%). The number of hedge funds grew 10% to 8,900 funds.

“Despite some high profile disappointments, the hedge fund industry continued to see positive inflows, confirming its maturity as an asset class,” said E. Lee Hennessee, managing principal of Hennessee Group LLC, in the news release.

Individuals and family offices (including funds’ general partners and employees) continue to represent the largest source of capital for hedge funds, comprising 40% of total industry assets, Hennessee found. After that:

  • fund-of- funds represent 28%,

  • corporations represent 18%,

  • pensions represent 11%, and

  • endowments and foundations represent 8%.

Meanwhile, hedge funds surveyed had an average long exposure of 106% and short exposure of -55%, indicating a low use of margin. The funds had an average gross exposure (longs plus shorts) of 161%, while net exposure (longs minus shorts) was +51%.

Some 86% of hedge funds are registered with a regulatory agency, up from 61% the previous year, the survey found.

The 2006 survey respondents include 440 hedge funds from 97 management companies representing over $256 billion in assets.For details or questions regarding the survey, call (212) 857-4400.