hfr market microstructure industry report – second quarter ...€¦ · hfr market microstructure...

HFR Market Microstructure Industry Report – Second Quarter 2011Copyright 2011. All rights reserved.www.HedgeFundResearch.com 2

Hedge Fund Research, Inc. (HFR) is the global leader in the alternative investment industry. Established in 1993, HFR specializes in the areas of indexation and analysis of hedge funds. HFR Database, the most comprehensive resource available for hedge fund investors, includes fund-level detail on historical performance and assets, as well as firm characteristics on both the broadest and most influential hedge fund managers. HFR has developed the industry’s most detailed fund classification system, enabling granular and specific queries for relative performance measurement, peer group analysis and benchmarking. HFR produces over 100 indices of hedge fund performance ranging from industry-aggregate levels down to specific, niche areas of sub-strategy and regional investment focus. With performance dating back to 1990, the HFRI Fund Weighted Composite Index is the industry’s most widely used standard benchmark of hedge fund performance globally. The HFR suite of Analysis Products leverages the HFR Database to provide detailed, current, comprehensive and relevant aggregate reference points on all facets of the hedge fund industry. HFR also offers consulting services for clients seeking customized top-level or more nuanced analysis.

For the hedge fund industry’s leading investors and hedge fund managers, Hedge Fund Research is The Institutional Standard

About HFR Database

The licensed/redistributed HFR Database, currently comprised of over 6,700 funds and fund of funds, is available to all accredited investors. Information on our hedge fund universe of established and emerging managers is collected directly from the fund managers and/or their respective offshore administrators, while other pertinent information is culled from offering memoranda, onsite visits, and due diligenceinterviews.

HFR Database is utilized globally by thousands of accredited investors at leading banks, brokerage firms, investment advisors, wealth managers, funds of hedge funds, hedge funds, academic institutions, foundations, endowments, family offices and sovereign wealth funds. All client relationships are confidential in nature.

Hedge Fund Research believes that accurate information on fund managers is critical to any alternative investment enterprise. To that end, our analysts have monitored and tracked performance and administrative data internally on over 16,000 historically, covering both domestic and international funds, offering comprehensive information not available from other commercial data providers. HFR's dedicated Research Staff searches for new funds to add to the Database on a daily basis.

► HFR provides subscribers with an unparalleled breadth of fresh information with daily updates HFRDatabase.com is updated daily with fresh data & information, recently submitted by a broad spectrum of funds. New fund data is added by HFR staff or by the fund managers themselves. We

do not work with third party data providers

► HFR works directly with FUND MANAGERS to gain the most up-to-date and accurate fund info possible HFR requests that our client fund managers report performance by the 15th of each month. We also directly integrate the fund manager with HFR Database by providing them with their own

website for updating their fund profile. In this manner HFR ensures current and accurate fund data that flows seamlessly from fund managers to subscribers.

► Database includes Administrative, ROR, AUM, Instruments and Region fund data Full Database details and field definitions available at www.HedgeFundResearch.com.

HFR Database now includes Enhanced HFRI / HFRX Index Constituent Tables


Hedge Fund Research, Inc.

HEDGE FUND LAUNCHES OUTPACE LIQUIDATIONS AS INDUSTRY ASSETS REACH RECORD LEVEL

Average incentive fees continue to decline; Fund performance dispersion rises, reversing recent trend

CHICAGO (September 14, 2011) – New hedge fund launches in the second quarter of 2011 totaled 280, a slight decline from the 298 new funds that were launched in the first quarter, according to data released today by HFR in the latest edition of Market Microstructure Report: 2Q11. The first half launch total of 578 was the strongest six months since the first half of 2007, as total hedge fund industry capital reached a record level of $2.04 trillion. Fund liquidations in 2Q totaled 191, a slight increase from the 1Q total of 181; the liquidation total for the second quarter represents an attrition rate of 2.07 percent.

Investors exhibited a preference for direct investment in single-manager vehicles, as opposed to commingled fund of funds (FOF). Single-manager launches accounted for 245 of the launches in 2Q11, the highest level since 2Q07, while FOF’s experienced a net decline, with 53 liquidations and only 35 new launches.

Lower Fees, Higher VolatilityBoth management and incentive fees charged by hedge funds declined in 2Q, with incentive fees posting a more

significant decline. Average incentive fees industry-wide declined to 18.81 percent in 2Q (from 18.95 percent in Q1); however, the average incentive fees of funds launched in the trailing 12 months was 17.56 percent, the lowest level since 2005. Average hedge fund management fees posted a narrow decline of 1 bp to 1.57 percent, while FOF management fees were unchanged at 1.3 percent.

Performance dispersion between best and worst performing deciles of funds in the trailing 12 months rose to nearly 61 percent, reversing a trend of narrowing dispersion from prior quarters when volatility declined. The top performing decile gained an average of +48.2 percent over the trailing 12 month period, while the bottom decile declined by -12.7 percent. Recent performance dispersion represents an increase over prior quarters, however this remains well below the peak of over 116 percent observed in 2009.

“The first half of 2011 was a strong environment for new hedge fund launches, with the industry on pace to approach the full year total of nearly 1,200 launches in 2007,” said Kenneth J. Heinz, President of HFR. “While lower fees continue to besupportive of this growth trend, the evolution of fund transparency is also a significant factor driving new fund launches. As volatility has increased throughout 3Q, we expect fund launches to continue to appeal to these investor preferences, as hedge funds position for strategic growth and take advantage of tactical opportunities created by these volatile market conditions.”


Hedge Fund Research, Inc.

新成立对冲基金超过倒闭，市场规模达到历史高点平均激励费继续下跌；

基金的业绩分歧增大，改变了先前逐渐缩小的趋势

芝加哥（2011年9月14日）--HFR最近的2011年第二季度市场微观报告数据表明， 2011年第二季度有280家新基金成立，稍逊于2011年第一季度的298家。2011年上半年共有578家新基金成立，是自2007年上半年以来最强劲的半年，整个对冲基金市场的资产规模达到2.04万亿美金的历史高点。第二季度有191家基金倒闭，稍高于第一季度的181家；倒闭率为2.07%。

投资人表现出愿意直接投资到单基金经理基金而不是间接投资到组合基金的偏好，第二季度有245家新单基金经理基金成立，是自2007年第二季度以来的最高水平，而组合基金数量净下跌，有53家基金倒闭而只有35家新基金成立。

费率降低，市场波动加剧对冲基金征收的管理费率和激励费率在第二季度都下跌，激励费率下跌更为明显。整个市场的

平均激励费率在第二季度下跌为18.81%（第一季度为18.95%）；另外，过去12个月新成立的基金的平均激励费率为17.56%，是自2005年以来的最低水平。平均的管理费率稍微下跌了1个基点到1.57%，而组合基金的管理费率依然为1.3%。

在过去的12个月中业绩最好和最差的基金之间的业绩差异加剧到61%，改变了过去几个季度随着市场波动性减小而业绩差异逐渐减小的趋势。在过去的12个月中业绩最好的10%的基金平均业绩为48.2%，而表现最差的10%的基金平均业绩下跌了-12.7%。尽管最近的业绩差异较前期上升，但是它仍然远远低于2009年116%的业绩差异历史最高水平。

“2011年上半年为新基金成立创立了有利的环境，整个市场正在迈向2007年整年近1200家新基金成立的历史水平，”Ken J. Heinz，HFR总裁说，“尽管更低的基金费率支持了对冲基金市场增长，基金透明性的演进也是新基金增加的主要因素。随着市场在第三季度波动性的加剧，我们期望新基金的成立对投资人的偏好继续充满吸引力，并有效利用市场环境波动带来的机会，准备好以策略性增长。”


1. Hedge Fund Industry Strategy Evolution & Growth

2. Industry Service Providers & Hedge Fund SEC-Registration Analysis

3. Industry Performance & Dispersion Analysis

4. Analysis of Industry Fee Structure

5. Industry Launches & Liquidations

6. Analysis of Diversity & New Manager Universes


1. Hedge Fund Industry Strategy Evolution & Growth


Estimated Growth of Assets by Sub-StrategyMacro 1990 – Q2 2011

$15,292 $20,507 $26,198

$55,976 $48,187 $45,381

$58,677

$77,069

$61,564 $65,409 $56,875

$76,952

$109,731

$146,057

$185,737

$208,855

$254,996

$288,467 $278,661

$289,075

$380,833

$407,746 $419,125

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Q12011

Q22011

Asse

ts ($

MM

)

Active Trading Commodity Currency - Discretionary Currency - Systematic

Discretionary Thematic Multi-Strategy Systematic Diversified Macro Total


Single-Manager Hedge Funds

Special Situations

Activist

Credit Arbitrage

Distressed /Restructuring

Merger Arbitrage

Private Issue /Regulation D

Multi-Strategy

DiscretionaryThematic

Active Trading

Commodity

Agriculture

Energy

SystematicDiversified

Currency

Discretionary

Systematic

Multi-Strategy

Short Bias

Equity Market Neutral

FundamentalGrowth

FundamentalValue

QuantitativeDirectional

Sector

Energy / Basic Materials

Technology /Healthcare

Multi-Strategy

Equity Hedge MacroEvent-Driven

Metals

Multi

EnergyInfrastructure

Real Estate

Relative Value

Fixed Income –Asset Backed

Fixed Income –Convertible Arbitrage

Fixed Income –Corporate

Fixed Income –Sovereign

Volatility

Yield Alternatives

Multi-Strategy

Multi-Manager Funds

Fund of Funds

Conservative

Diversified

Market Defensive

Strategic

HFR Strategy Classification


HFR Regional Investment Focus Classifications

America Asia Europe Other

North America

Latin America

Pan-American

Japan

Asia ex-Japan

Asia with Japan

Western Europe /UK

Russia /Eastern Europe

Northern Europe

Pan-European

Africa

Middle East

Global

Multiple Emerging Markets

Emerging Markets

Africa Latin America Middle EastMultiple

Emerging MarketsAsia ex-Japan Russia /Eastern Europe


Estimated Breakdown of Fund Management Firm LocationFund Regional Investment Focus in Europe – Q2 2011

Cayman Islands 0.59%

France 5.34%

Russia 5.04%

Spain 0.89%

Sweden 3.86%

Switzerland 9.79%

UK 44.81%

USA16.91%

Other 12.76%

By # Funds By Assets

Cayman Islands 1.28%

France 3.56%Russia 1.72%

Spain 0.68%

Sweden 11.35%

Switzerland 2.44%

UK 52.98%

USA 24.60%

Other 1.38%


2. Industry Service Providers & Hedge Fund SEC-Registration Analysis


Estimated Breakdown of Hedge Fund Prime Brokers All Fund Regional Investment Focus Regions – Q2 2011

Bank of America Merrill Lynch 5.62%

Barclays Capital 1.04%

BNP Paribas 2.20%

CIBC World Markets 0.07%

Citigroup 3.98%

Credit Suisse 5.14%

Deutsche Bank 4.54%

Goldman Sachs 19.02%

ING 0.74%

JP Morgan 11.16%

LaSalle 0.15%

MF Global 1.90%

Morgan Stanley 13.25%

NCB Stockbrokers Ltd.,Dublin 0.15%

NewEdge 5.88%

Royal Bank ofScotland 0.22%

Spear, Leeds &Kellogg 0.22%

UBS 7.03%

Other 17.68%

By # Funds By Assets

Bank of America Merrill Lynch 4.06%

Barclays Capital 2.00%

BNP Paribas 0.83%

CIBC World Markets 0.48%

Citigroup 2.63%

Credit Suisse 4.45%

Deutsche Bank4.50%

Goldman Sachs20.49%

ING 0.95%

JP Morgan 27.96%

LaSalle 0.59%

MF Global 0.55%

Morgan Stanley14.06%

NCB Stockbrokers Ltd.,Dublin 1.72%

NewEdge 3.86%

Royal Bank of Scotland 0.56%

Spear, Leeds & Kellogg 0.52%

UBS 6.43%Other 3.37%

V


3. Industry Performance & Dispersion Analysis


HFRI Index Methodology

The HFRI Monthly Indices (HFRI) are equally weighted performance indexes utilized globally as an Industry benchmark. The Indices are broken into 29 different categories by strategy, including the HFRI Fund Weighted Composite, which accounts for over 2,000 funds listed on the internal HFR Database.

Funds included in the HFRI Monthly Indices are required to report monthly, net of all fees performance and assets under management U.S. dollars. Constituent funds must have either (a) $50 million under management or (b) a track record of greater than twelve (12) months. Funds are eligible for inclusion in the HFRI performance calculations in the month after their addition to HFR Database. If a fund liquidates or closes, that fund's performance will be included in the HFRI as of that fund's last reported performance update. The HFRI Fund of Funds Index is not included in the HFRI Fund Weighted Composite Index. Both domestic and offshore funds are included in the HFRI.

Annualized Returns, Standard Deviation, Sharpe Ratios, Positive Monthly Performance, and correlation to the S&P 500 (w/ dividends) for each HFRI Index were calculated over a one, three, and five-year period based on monthly performance. All Sharpe and Sortino Ratios assume an average Risk-Free Rate for the appropriate time periods as follows: 5-year, 1.94%; 3-year, 0.38 %; 1-year, 0.14%. The Sortino Ratio also assumes the same rates as above for the MAR (Minimum Acceptable Return). Positive Monthly Performance was calculated by dividing the number of months the HFRI Index performed positive over the appropriate time period. The Benchmarks used to compare the HFRI Indices include the S&P 500 (w/ dividends) and the Barclays Government/Credit Aggregate Bond Index.

Quarterly Performance and 12-Month Moving Average are calculated for each HFRI Index over a five-year period. In addition, each HFRI Index is compared to the benchmarks using Up/Down Capture and Return Distribution Analysis over a five-year period. Up/Down Capture Analysis is performed by calculating the average monthly performance during the “up” and “down” months of the market using the S&P 500 as a benchmark and can be used to compare performance of a particular strategy during both negative and positive performing months of the market. The Return Distribution Analysis is performed by calculating the percentage of monthly average returns over the given time period and can be used to compare the dispersion of returns to the benchmarks.


HFRI Fund Weighted Composite IndexQuarterly Performance Q1 1990 – Q2 2011

(15)

(10)

(5)

0

5

10

15

20

Q1-

1990

Q2-

1990

Q3-

1990

Q4-

1990

Q1-

1991

Q2-

1991

Q3-

1991

Q4-

1991

Q1-

1992

Q2-

1992

Q3-

1992

Q4-

1992

Q1-

1993

Q2-

1993

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1993

Q4-

1993

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1994

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1994

Q3-

1994

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1994

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1995

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1995

Q3-

1995

Q4-

1995

Q1-

1996

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1996

Q3-

1996

Q4-

1996

Q1-

1997

Q2-

1997

Q3-

1997

Q4-

1997

Q1-

1998

Q2-

1998

Q3-

1998

Q4-

1998

Q1-

1999

Q2-

1999

Q3-

1999

Q4-

1999

Q1-

2000

Q2-

2000

Q3-

2000

Q4-

2000

Q1-

2001

Q2-

2001

Q3-

2001

Q4-

2001

Q1-

2002

Q2-

2002

Q3-

2002

Q4-

2002

Q1-

2003

Q2-

2003

Q3-

2003

Q4-

2003

Q1-

2004

Q2-

2004

Q3-

2004

Q4-

2004

Q1-

2005

Q2-

2005

Q3-

2005

Q4-

2005

Q1-

2006

Q2-

2006

Q3-

2006

Q4-

2006

Q1-

2007

Q2-

2007

Q3-

2007

Q4-

2007

Q1-

2008

Q2-

2008

Q3-

2008

Q4-

2008

Q1-

2009

Q2-

2009

Q3-

2009

Q4-

2009

Q1-

2010

Q2-

2010

Q3-

2010

Q4-

2010

Q1-

2011

Q2-

2011

Qua

rter

ly R

ate o

f Ret

urn

%


HFRI Fund Weighted Composite IndexReturn Distribution Analysis and Up/Down Capture 1990 – Q2 2011

0%

10%

20%

30%

40%

50%

60%

<-10% -8 to10%

-6 to8%

-4 to6%

-2 to4%

-2 to0%

0 to2%

2 to4%

4 to6%

6 to8%

8 to10%

>10%

Monthly Average Return %

HFRI Fund Weighted Index Barclays Capital Government/Credit Bond Index S&P 500 w/ dividends

(5.00)

(4.00)

(3.00)

(2.00)

(1.00)

0.00

1.00

2.00

3.00

4.00

Up Months Down Months

Mon

thly

Ave

rage

Ret

urn

%


HFRI Fund of Funds Composite AnalysisDispersion of Average Fund Performance by Deciles

Trailing 12 Months ending Q2 2011

20.44

12.38

10.09

8.66

7.28 6.24

5.14

3.80

2.37

(0.48)

18.85

11.71

9.82

8.24

7.01 5.97

4.83

3.52

1.77

(4.13)

15.41

10.98

9.52

7.78 6.77

5.73

4.45

3.20

1.16

(4.39)

(10.00)

(5.00)

0.00

5.00

10.00

15.00

20.00

25.00

1st Decile 2nd Decile 3rd Decile 4th Decile 5th Decile 6th Decile 7th Decile 8th Decile 9th Decile 10th Decile

Retu

rn %

Top 25% Decile ROR Decile Average ROR Bottom 25% Decile ROR


4. Analysis of Industry Fee Structure


HFRI Fund Weighted Composite IndexManagement Fee Dispersion by Fund Performance Deciles

12-Months Rolling ending Q2 2011

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1st Decile 2nd Decile 3rd Decile 4th Decile 5th Decile 6th Decile 7th Decile 8th Decile 9th Decile 10th Decile

None < = 1.00 % 1.01 - 1.50 % 1.51 - 2.00 % > 2.00 %


5. Industry Launches & Liquidations


Estimated Launch Rate of All Funds per Year1996 – Q2 2011

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

0

2,000

4,000

6,000

8,000

10,000

12,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Trailing12

Months

Laun

ch R

ate

%

# To

tal

Fund

s

# Total Funds Launch Rate %


Estimated Attrition Rate of All Funds per Year1996 – Q2 2011

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

0

2,000

4,000

6,000

8,000

10,000

12,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Trailing12

Months

Attr

ition

Rat

e %

# To

tal

Fund

s

# Total Funds Attrition Rate %


6. Analysis of Diversity & New Manager Universes


Qualities of Hedge Fund Indexation Universes

• Single-Manager Funds Universe includes all funds which report performance and complete firm information to HFR Database. In contrast to below, funds are not excluded per any criteria if they are actively reporting results.

• Unique Single-Manager Funds Universe includes all Single-Manager Universe funds, screened for redundant funds by same management firm (ie, onshore/offshore, pari passu, multiple share classes).

• Static Transparent Universe a sub-set of the Unique Single-Manager Funds Universe, screened for funds which are open to new investment via a separately managed account.

• HFRI Universe (HFRI FWC) a sub-set of the Single-Manager Funds Universe includes funds which are currently constituents of the HFRI Indices. Funds included in the HFRI Monthly Indices are required to report monthly, net of all fees performance and assets under management U.S. dollars. Constituent funds must have either (a) $50 million under management or (b) a track record of greater than twelve (12) months. Funds are eligible for inclusion in the HFRI the performance a month after their addition to HFR Database. If a fund liquidates or closes, that fund's performance will be included in the HFRI as of that fund'slast reported performance update. The HFRI Fund of Funds Index is not included in the HFRI Fund Weighted Composite Index. Both domestic and offshore funds are eligible for inclusion in the HFRI Universe, but typically a unique representative for eachstrategy is chosen.

• HFRI Static Transparent Constituents a sub-set of the HFRI FWC Universe, screened for funds which are open to new investment via a separately managed account.

• New Manager Universe includes all funds which report performance and complete firm information to HFR Database which have less than 24 months of track record since fund inception. These include funds which are not currently in the HFRI Universe.

• Diversity Universe includes all funds which report performance and complete firm information to HFR Database which have represented they are owned by women or ethnic minorities.


Index Constituent ComparisonPercent of Funds per Asset Tier Q2 2011

19.86%

15.60%

29.01%

12.61%

11.64%

5.31%5.99%

20.69%

16.54%

30.63%

13.15%

10.58%

4.73%3.68%

34.33%

21.96%

29.42%

7.04%

4.05%2.56% 0.64%

HFRI Fund Weighted Comp HFRI Static Transparent Universe New Managers Universe

HFRX Global Diversity Universe2.27%

6.82%

31.82%

22.73%

20.45%

9.09%

6.82%

36.99%

10.96%

30.14%

11.64%

5.48%2.74% 2.05%

< $10 Million

$10 to $25 Million

$25 to $100 Million

$100 to $200 Million

$200 to $500 Million

$500 Million to $1 Billion

> $1 Billion


Historical Annual Performance of New Managers vs. Established Managers

New Managers Established Managers1995 18.12% 19.56%1996 19.00% 14.77%1997 16.42% 13.54%1998 8.49% 4.17%1999 29.57% 27.92%2000 11.92% 7.23%2001 9.31% 4.96%2002 5.72% 0.99%2003 17.91% 19.25%2004 8.11% 8.20%2005 8.72% 7.85%2006 10.79% 10.44%2007 12.20% 9.29%2008 -1.76% -11.97%2009 20.86% 23.09%2010 9.98% 9.73%

Q1 2011 1.25% 1.70%Q2 2011 0.04% -0.85%

Average Fund Annual Net ReturnYear


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