The European hedge fund industry continued its recovery amid a difficult market environment with its current assets under management (AUM) standing at US$407.8 billion overseen by a population of 3,900 hedge funds. At its peak in October 2007, the European hedge fund industry’s share of global AUM was almost 25% and currently it still remains below that level at 21.4%.
In 2000, the European hedge fund industry had 470 funds managing a total of US$38.6 billion in AUM. Over the course of the next seven years, the industry saw tremendous growth with AUM peaking at US$472.8 billion by October 2007. The onset of the global financial crisis dealt a serious blow to the industry with managers seeing large redemptions and heavy performance-based losses – the Eurekahedge European Hedge Fund Index dropped by 17.4% in 2008 with AUM declining by 37.9% from their 2007 peak to bottom out at US$293.6 billion by March 2009. With a rebound in global markets in the second quarter of 2009, the European hedge fund industry also reversed the downward trend by posting excellent performance-based gains and also attracting some assets from investors. By the end of 2009 total assets in European hedge funds had reached US$346.5 billion.
Figure 1: Industry growth since 2000
In 2010, the fortunes of European hedge funds waned once more amid the sovereign debt crisis. Although European managers posted some healthy returns and offered downside protection they witnessed net outflows during the first eight months of the year.