In 1998, U.S. dominance had dropped to 85% of the 3,500 hedge funds, while the market share of European managers rose to 10%; Asian managers accounted for 2%; and managers in other regions managed 3% of funds.
During the 15 years ended Dec. 31, 2006, U.S. hedge fund managers lost a whopping 28 percentage points of market share, dropping to 65% of the 7,000 funds managed globally, while European managers more than tripled their market share to 20%, Asian-based funds jumped to 10% of the total, and funds managed elsewhere in the world came to 5% of the total.
If you talk to most hedge fund-of-funds groups, especially those based in the U.S., they have more than 68% of their assets invested in U.S.-based hedge funds, Mr. Smith said.
Its not that I think one location is a smarter location for a manager than another, but what I can say is
that for convertible (volatility) for example, there is a totally different opportunity set in Europe or Asia convert vol than there is in U.S. convert vol. It doesnt mean that one is right or different, but the diversification (for a hedge fund-of-funds manager) doesnt come from holding two U.S.-based convert vol guys. It comes from holding two guys in different parts of the world, with different information flows and different systems trades, Mr. Smith said.