European Alternative Investment Overview, Part I: Hedge Funds and Property Funds

Celent projects that hedge fund closures will rise in 2005 and 2006 as new investors flood the market with too much cash.

The world of alternative investment funds is hot洋oney has poured into hedge funds and property funds at an accelerated pace in 2004 and 2005, as investors chase above-average returns in a lackluster market. While the US is the leader in hedge fund assets under management, Europe is a major player. Europe accounts for more than US$230 billion in hedge fund assets under management, out of a global total in excess of US$1 trillion. In property investing, the European market is more established than the US market, and equals its assets under management of US$340 billion.

In a new report, , Celent provides an overview and analysis of key market trends, identifying leading industry players and discussing prospects for future growth. It examines the forces that will make it harder for many players in the alternative investment field to continue to achieve the above-average risk-adjusted returns that have made them such a popular class of investments and analyzes the threat to the different classes of funds.

"While the hedge fund industry will continue to increase assets under management, returns in 2005 and 2006 will suffer, as too much money is chasing the same set of investment strategies," says Lauren Bender, senior analyst in Celent痴 Securities and Investments group and author of the report. "We will see the number of midsize firms decrease sharply, as large funds continue to take the lion痴 share of new assets and as small, agile newcomers take advantage of new strategies before the rest of the industry follows."

Over time, Celent expects to see the lines between the various alternative investment funds continue to blur, eventually resulting in large, "alternative investment" funds that are free to pursue multiple strategies within the same fund as the market evolves.

The report includes tables listing the largest European hedge fund managers, hedge fund of fund managers, and property managers. The primary countries covered are the United Kingdom, Switzerland, France, Germany, and the Netherlands.

This report is the first of a two-part series on European alternative investment funds. Part I focuses on European Hedge Funds, Hedge Funds of Funds, and Property funds. Part II will focus on Private Equity funds and Venture Capital funds.

The 36-page report contains 15 charts and 4 tables. A table of contents is available online.

All Members of Celent's Institutional Securities & Investments research service can download the report electronically by clicking on the icon to the left. Non-members should contact info@celent.com for more information.