Hedge Funds Meet Investor Expectations

The 5% growth in industry assets during 2002 from $563 billion to $592 billion, or the Hennessee Hedge Fund Index experiencing its first down year since its 1987 inception (See    Hedge Funds Down In December and 2002 ) did little to hamper participant satisfaction.   One-third of the investable assets that hedge fund investors have at their disposal are devoted to hedge funds, according to the Sixth Annual Hennessee Hedge FundInvestor Survey.

Further, 43% indicated plans to increase their hedge fund investment in 2003,   while 25% said they would increase their fund-of-funds investment.Convertible arbitrage and distressed styles were the most frequentlychosen, both appearing in 61% of hedge fund portfolios.

Overall, Hennessee found 30% of hedge funds use a multi-manager product for their traditional   investments while 50% are using a multi-manager product for their hedgefund investments.   When asked what were the most important issues when considering which funds to invest in, hedge fund investors responded to transparency (20%) and liquidity (18%).

Since the dawn of the new millennium, the hedge fund industry has grown by 82%, from $324 billion to $592 billion. The largest investors in hedge funds continue to be individuals and family offices, comprising 56% of the capital in the industry.   However, the largest increase in hedge fund investments came from endowments, with a jump from 6% in the 2002 survey to 16% in the 2003 survey.