Survey Sees Hedge Fund Growth up 26%

April 15, 2002 ( - Total global hedge fund assets are expected to grow 26% in 2002, according to a survey from Goldman Sachs Prime Brokerage.

This would bring the hedge fund industry’s total assets under management to $760 billion, from an assumed base of $600 billion, the data from the group’s 2002 annual Global Hedge Fund Investor Survey show.

Almost three quarters of respondents think the hedge fund industry is in a state of either steady or substantial growth, standing in stark contrast to the 8% who feel the hedge fund industry is in a bubble.

Fund of Funds

The hedge fund survey shows that funds of funds expect to grow their assets by over 41% year on year in 2002. Fee structures for these vehicles will come under more pressure than hedge fund manager fees.

In fact, results show that:

  • 33% of respondents expect a cut in fund of fund fees
  • 15% expect hedge funds to drop their fees
  • 11% expect a rise in fund of fund fees
  • 13% foresee an increase in fees for hedge funds.

Family offices and private investors make up the bulk of fund of fund investors, with institutional investors making up the remainder. This is not expected to change this year.

Asset Allocation

The research also shows that investors in multiple asset classes are expected to increase their exposure to hedge funds, while cutting back on investments in private equity and traditional asset classes, Goldman Sachs reports.

Funds that employ equity long/short strategies are the most popular with hedge fund investors – some 40% of hedge fund assets are invested in these funds. Also popular are multi-strategy arbitrage funds and convertible bond arbitrage funds, each representing 10% of assets.

According to the survey, respondents expect that the investment environment over the next year will be beneficial to funds focusing on distressed investments, but detrimental to merger arbitrage strategies.

Survey Stats

The Goldman Sachs Global Hedge Fund Investor Survey comprised the responses of 251 hedge fund allocators with $226 billion directly invested into single manager hedge funds at the end 2001.

The survey was conducted from the end of November 2001 to the end of January 2002.