Hedge Funds Continue Growth in 2005

January 23, 2006 (PLANSPONSOR.com) - Hedge fund assets grew $121 billion in 2005 to $1.12 trillion, according to estimates by Hennessee Group LLC.

The increase in assets represents 12% growth over industry assets since the beginning of 2005.   In its press release, Hennessee Group said preliminary results indicate that the hedge fund industry experienced net inflows of $40 billion (4%) in 2005. The remaining $81 billion (8%) was the result of positive performance, as evidenced by the Hennessee Hedge Fund Index, which advanced 8.03% in 2005.

Total assets for arbitrage and event driven funds were up approximately 12.20% in 2005.  The majority of assets flowed to multi-strategy arbitrage funds.   Convertible arbitrage posted negative returns for the first time since 1994 and funds dedicated to this strategy experienced significant outflows of capital.   Merger arbitrage, event driven, and credit strategies all showed positive performance and inflows of capital.

Long/short equity assets increased approximately 11.50% in 2005, with over one-half the increase coming from performance.

Hennessee Group estimates that direct investments by individuals and family offices represent approximately 44% of total industry capital followed by fund of funds (28%), corporations and institutions (14%), pension plans (7%), and endowments and foundations (7%).

The Hennessee Group Web site is  www.hennesseegroup.com .