The Markets December 9, 2006

Hedge Fund Industry Grew 21% in 2006

A new survey of the US hedge fund industry found it has grown 21% to $1.22 trillion this year.
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A news release from the Hennessee Hedge Fund Advisory Group about its 12th Annual Hennessee Hedge Fund Manager Survey found that asset growth over the year was the result of positive manager performance (+11%) and new capital inflows (+10%). The number of hedge funds grew 10% to 8,900 funds.

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“Despite some high profile disappointments, the hedge fund industry continued to see positive inflows, confirming its maturity as an asset class,” said E. Lee Hennessee, managing principal of Hennessee Group LLC, in the news release.

Individuals and family offices (including funds’ general partners and employees) continue to represent the largest source of capital for hedge funds, comprising 40% of total industry assets, Hennessee found. After that:

  • fund-of- funds represent 28%,

  • corporations represent 18%,

  • pensions represent 11%, and

  • endowments and foundations represent 8%.

Meanwhile, hedge funds surveyed had an average long exposure of 106% and short exposure of -55%, indicating a low use of margin. The funds had an average gross exposure (longs plus shorts) of 161%, while net exposure (longs minus shorts) was +51%.

Some 86% of hedge funds are registered with a regulatory agency, up from 61% the previous year, the survey found.

The 2006 survey respondents include 440 hedge funds from 97 management companies representing over $256 billion in assets.For details or questions regarding the survey, call (212) 857-4400.

In Practice December 5, 2006

Workers Give Minimal Attention to Retirement Accounts

The majority of workers polled by AllianceBernstein admitted they are unprepared or reluctant to monitor and manage their retirement plan investments.
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According to a press release on the survey, 61% of respondents said they are what AllianceBernstein calls “Accidental” investors, meaning they lack confidence in their ability to manage their investments, do not enjoy the process, and give minimum attention to their retirement plan accounts. Nearly half of all “Accidental” investors said they review their investments no more than once a year – or not at all (32%).

 Most of the workers surveyed who do monitor their investments said the retirement plan statement is the primary source of information for them, the release said. Half of all “Accidental” investors also said they primarily rely on their retirement plan statement for monitoring their accounts.

 Most of the workers surveyed who do monitor their investments said the retirement plan statement is the primary source of information for them, the release said. Half of all “Accidental” investors also said they primarily rely on their retirement plan statement for monitoring their accounts.

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 Among all 401(k) eligible investors, the Internet is the second most important resource for monitoring retirement plan savings (33%).Mutual fund NAV’s in newspapers ranked last (3%) in helping participants determine the value of their retirement investments.

  

Dick Davies, Senior Managing Director, head of Institutional Defined Contribution Services at AllianceBernstein pointed out that the release provisions of the Pension Protection Act of 2006 that govern automatic enrollment, default investments, automatic contribution rate escalation, and the frequency and content of participant statements show that, “[r]ather than fight employee inertia, the lesson learned over the past 25 years of the 401(k) experience is to harness it.”

 

Workers surveyed were age 18 or older and employed full time by companies offering a 401(k) plan.

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