Hedge Funds, Six Years After Lehman

Despite the near-collapse of western banking and the subsequent avalanche of regulation, the hedge fund sector is growing solidly.

Hedge fund assets have grown by more than a quarter since the collapse of Lehman Brothers in September 2008, according to Preqin—and fewer are sticking to old fee models.

The data provider has published a factsheet illustrating changes to the hedge fund sector since the point that it argued was “the very height of the global financial crisis”.

It revealed total industry assets have increased to nearly $3 trillion since September 2008.

Preqin also found that proportionally fewer hedge funds were charging the traditional “2 and 20” fees, which have come under scrutiny following bouts of underperformance in some areas. The data provider found that roughly 23% of hedge funds currently active used this model, compared with 28% in 2008.

This was evidently not enough of a change for the California Public Employees’ Retirement System, which earlier this month announced it was to wind down its $4 billion allocation to hedge funds.

There are currently 5,882 hedge funds still active that were launched after the collapse of Lehman Brothers, while 5,165 launched before September 2008 are still operational, Preqin said.

The makeup of the hedge fund investor base has changed too: In 2008, 45% of industry assets were from institutional investors—this proportion has now increased to 63%. Preqin identified roughly 4,750 separate investors now allocating to hedge funds, compared to 3,500 in 2008—an increase of 44%.

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