Assets invested in hedge funds increased 34% in 2003, ending the year at $795 billion, according to the annual Hennessee Group survey of hedge fund investors, released today. Also, hedge fund assets increased 145% over the past three years, from $324 million as of Jan. 1, 2000. More than half (55%) of hedge fund investors surveyed said they intend to increase their allocations to the asset class despite the underperformance last year of the Hennessee Hedge Fund index relative to other market benchmarks. The Hennessee index returned 19.69% in 2003, compared with 28.68% for the S&P 500, 28.28% for the Dow Jones industrial average and 50.01% for the Nasdaq composite. Also, 88% of investors said their hedge fund investments met or exceeded their expectations.
The most popular hedge fund styles were distressed, present in 63% of hedge fund portfolios; event-driven, in 56%; and convertible arbitrage, 55%.
Of endowments that invest in hedge funds, 62% said they expect to increase their allocations to the asset class. Hennessee reported that 42% of investors use a consultant to help them select hedge fund managers, a 68% increase since 1999.