As of the second quarter of 2014, there were 10, 844 hedge funds operating worldwide with over 8,000 of them located in the United States. By the first half of 2014, U.S. hedge funds grew by 62.6 billion dollars to reach the 1.4 trillion Assets Under Management (AUM) mark. To put this data in historical perspective, in 2000 there were a total of 2,840 global funds managing 335 billion dollars. The opportunities for investing in hedge funds has not been lost on the European and Asian markets whose hedge funds are rapidly gaining attention as alternatives to the U.S. alternative investment funds.
Worldwide vs. United States
Globally, the value of all hedge funds stood at 2.12 trillion dollars in AUM by June 2014; that means that non-U.S. funds made up 780 billion dollars of those assets. European hedge funds attracted 33.4 billion dollars in net asset flows, up from 29.4 billion for the same period in 2013, while Asian funds saw their AUM grow by $6.5 billion so far this year.
Winners and Losers
The number of Commodity Trading Adviser (CTA)-managed funds dropped by 93 funds in the first half of 2014 and experienced net asset outflows of $11.5 billion. By contrast, the winners were long-short equity, fixed income and multi-strategy funds that gained $55.5 billion, $15.6 billion and $10.1 billion in net asset flows respectively during the first six months of 2014.
Real Recovery Since 2012
In a prudent move, hedge fund managers sold off their holdings rather aggressively at the first signs of the financial crisis leaving mutual funds to bear the brunt of the losses and consequently, hedge fund investors came out of the crisis comparatively better off in terms of total returns. By the end of 2010, hedge funds began to experience positive asset flows that aided the industrys recovery, but strong recovery did not materialize until 2012.
The Lessons of Risk Management
During the intervening four years between the crisis and the recovery, hedge fund managers learned the lessons of better risk management. According to the founder of Ineichen Research and Management:
The main differentiation between hedge funds and traditional asset management is risk management. Over the past four years an active risk management stance has resulted in a reduction of risk. The reason for more conservative risk taking is mainly a rise in uncertainty related to artificially enhanced asset prices and other forms of intervention. The modest returns of hedge funds over the past four years are a direct result of taking less risk. In essence, hedge funds have done what they are designed to do, which is take risk off the table when uncertainty rises.
David draws on 20+ years’ experience in both legal practice and in business services delivery since his own call to the Bar in 1989. With several years in the startup environment, including as a co-founder in the legal tech space specifically, he brings a unique and timely perspective on the role of data, automation and artificial intelligence in the modern and efficient delivery of services for legal consumers. Having been both a corporate buyer of legal services and a services provider, he identifies the greater efficiency and value that can be achieved in legal operations for corporate buyers especially.
An attorney, David worked for law firms Pinsent Masons and Linklaters in London before moving to New York to join Credit Suisse. As CAO, he helped negotiate & execute the relocation of Credit Suisse into its new NYC global HQ. Subsequently, David directed major global outsourcing, shared sourcing, HR operations & process efficiency initiatives including the digitization of records, the global roll-out of PeopleSoft HRMS & Y2K. David has worked extensively in the UK, US, Philippines, India and China markets in the areas of data management, human resources and business process outsourcing.
Most recently, David has been successfully investing in and serving as an advisory board member of several legal services start-ups including a cloud-based solution for legal process automation and e-filing; and a technology solution for large-scale capture of court and other public data used for litigation analysis, among others.
David graduated from the University of Manchester with Honors in Law and Bar School (College of Legal Education) in London, and has been a member of Middle Temple since 1989. He is the founder and former Chairman of The Global Sourcing Council.
Member: Bar of England & Wales, ABA, NYCBA, ACC, DRI