INTRODUCTION TO THE Intelligenthedgefundinvesting

By just about any metric, the assets allocated to hedge funds continue to grow rapidly. At the time this volume is being published, data for the calendar year 2003 is just becoming available.

The approximate number of extant hedge funds is 6,700 (including 1,700 funds of funds), and the estimated total US dollar value of the assets of these funds is US$725 billion (or more). The estimates provided here are according to TASS as reported by Reuters (2004).

More interesting, perhaps, is the (changing) composition of the investor base.

Traditionally, the majority of invested capital came from high net worth individuals (with greater than US$1 million in financial assets). Merrill Lynch Cap Gemini Ernst & Young (2003) estimated that 60% of hedge fund investments came from such individuals in 2002.

That percentage has been declining as institutional investments have been growing rapidly. Endowments have become a major source of funding. The National Association of College and University Business Officers (2004) estimated that, in 2003, about 13% of investment assets were allocated to hedge funds.

Most recently, pension funds have begun to devote more attention to hedge funds.

Surveying more than 1,000 pension funds and endowments in 2003, Greenwich Associates (2004) found a continued increase in planned allocations to hedge funds, with pension funds significantly increasing their targeted allocations from under 1% of assets to about 5% of assets. Greenwich Associates estimated that, in US dollar term.

 

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