Global hedge funds' assets up 13 per cent in 2010

• Hedge funds' assets up 13% in 2010 to $1.9 trillion, with further recovery to pre-crisis levels likely by end of 2011
• Net inflows of funds totalled $65bn in 2010 following two years of decline
• Fund of hedge funds' assets grow 10% in 2010 to $550bn, a third below peak from three years earlier
• London remains second largest centre for managers of hedge funds with 19% of global assets

Global hedge funds' assets increased by 13% in 2010 to $1.9 trillion, the second successive year of growth according to TheCityUK report Hedge Funds 2011. Barring further economic turbulence, growth is set to continue in 2011, with funds under management likely to recover to pre-crisis levels by the end of the year.

Growth in assets in 2010 was due both to a 10% performance return during the year and a $65bn net inflow of funds, as net asset flows turned positive for the first time in three years. Prior to this, hedge funds saw a surge in redemptions and fall in liquidity, particularly in the latter part of 2008 and first half of 2009. The number of hedge funds totalled over 9,500 at the end of 2010, with new hedge funds launches outpacing fund liquidations for the first time since 2007.

The fund of hedge funds industry has been particularly affected by the economic downturn of the past two years and reputational damage resulting from the Madoff fraud. Assets of fund of funds totalled $550bn at the end of 2010, up 10% from the previous year, but over a third below the peak seen three years earlier.

TheCityUK estimates that 41% of global hedge fund assets were managed from New York in 2010, down from over 50% a decade earlier. London's 19% share of the global total was slightly down on the previous year mainly due to quicker growth in hedge funds' assets in North America than in Europe during 2010. London has more than doubled its share of global hedge fund assets during the past decade.

Marko Maslakovic, Senior Manager, Economic Research at TheCityUK said: "The 700 hedge funds located in London manage around 70% of European based hedge funds' assets. The structural advantages which have long attracted hedge funds to London include its local expertise and the proximity of clients and markets. London is also a leading centre for hedge fund services such as administration, prime brokerage and custody".

Share of Global Hedge Fund Assets Under Management by Geographical Region
	Global assets ($bn)	% share of global assets
		London	Other Europe	New York	Other US	Other
2000	410	8	4	52	30	6
2007	2,150	20	2	40	17	21
2009	1,700	20	3	41	17	19
2010	1,920	19	3	41	17	20
Source: TheCityUK estimates

Hedge Funds 2011(.pdf, 799kb)