August 2012

PerTrac 2012 2

INTRODUCTION _______________________________________________________________________________________ 3

EXECUTIVE SUMMARY _________________________________________________________________________________ 4

Number of Funds and Assets Under Management (AUM) ______________________________________________ 4

METHODOLOGY_______________________________________________________________________________________ 5

SINGLE-MANAGER HEDGE FUNDS _______________________________________________________________________ 6

Commodity Trading Advisors (CTAs) (included in single -manager hedge fund totals) ______________________ 9

FUNDS OF HEDGE FUNDS (FOHFS) _____________________________________________________________________ 10

AUM COMPARISON BETWEEN FUND TYPES _____________________________________________________________ 12

CONCLUSION ________________________________________________________________________________________ 14

ABOUT THE STUDY ___________________________________________________________________________________ 15

ABOUT PERTRAC _____________________________________________________________________________________ 15

PerTrac 2012 3

Sizing the Hedge Fund Universe: First Half 2012 is a semi-annual update to PerTracs full-year

analysis of the composition and size of the single-manager hedge fund and funds of hedge

funds industry. The 2012 first half review was produced by aggregating investment data from

eleven of the worlds largest alternative databases and by utilizing the capabilities of PerTrac

Analytics, the global leader in investment analysis, risk management and asset allocation

software.

This study analyzes fund size and type with respect to the number of distinct funds reporting

information to databases, along with the disaggregated totals by investment fund types. Fund

types include single-manager hedge funds, commodity trading advisors (CTAs)a subset of

single-manager hedge fundsand funds of hedge funds (FoHFs).

PerTrac 2012 4

Number of Funds and Assets Under Management (AUM)

All Funds

The total number of hedge funds and funds of hedge funds (FoHFs) reporting increased

to 14,013, representing growth of 4.61% from year-end 2011 to the end of first half

2012.

The reported AUM of hedge funds and FoHFs expanded by 3.21% to reach $2.317

trillion at the end of first half 2012.

Single-Manager Hedge Funds

The number of single-manager hedge funds reporting increased by 7.46% from year-end

2011 through the end of first half 2012, to a total of 10,754 funds.

Total reported AUM of single-manager hedge funds was approximately $1.892 trillion at

the end of first half 2012, an increase of 5.23% from year-end 2011.

There were 323 single-manager hedge funds that reported managing in excess of $1

billion in assets, less than a half percent increase from year-end 2011. Combined, these

billion-dollar-plus funds managed approximately $1.146 trillion, or 60.6% of the single-

manager hedge fund total reported AUM.

Commodity Trading Advisors (CTAs) (included in single-manager hedge fund totals)

The number of single-manager hedge funds employing CTA investment strategies was

1,528 at the end of first half 2012, an increase of 1.26% from year-end 2011.

The reported AUM of CTA funds was $438 billion at the end of first half 2012, an

increase of 6.05% from year-end 2011.

Forty five CTAs reported managing in excess of $1 billion at the end of first half 2012,

accounting for 78.1% of CTAs total reported AUM.

Funds of Hedge Funds (FoHFs)

The total number of FoHFs reporting at the end of first half 2012 was 3,259, a decrease

of 3.81% from year-end 2011.

The reported AUM of FoHFs declined by 4.92% in the first six months of 2012 to stand at

$425 billion.

FoHFs that reported managing in excess of $1 billion in assets accounted for 48.7% of

the total reported FoHF AUM. The average AUM of these billion-dollar-plus funds was

$2.3 billion.

PerTrac 2012 5

Eleven leading global databases were included in PerTracs research: BarclayCTA, BarclayHedge,

CogentHedge, Eurekahedge Hedge Fund, Eurekahedge Fund of Funds, HedgeFund.net, Hedge

Fund Research, MondoAlternative, MorningstarHedge, Tass, and TassCTA.

Funds typically report their information to databases at the share-class level. This is done to

account for variations in fee structures, minimum investment limits, currencies, redemption

periods, etc., for each share-class. We identified, where applicable, the fund-level data totals in

this study. Fund-level data in this study is the roll-up of the identified share-classes for each

fund.

As many of these databases contain records on the same funds, combining the databases

introduces duplicate data. In order to accurately assess the hedge funds and FoHFs reporting

performance it was necessary to scrub the data. Duplicate records for single-manager hedge

funds, CTAs and FoHFs were removed based on the analytical and statistical structure of

PerTrac ID, which is included in PerTrac Analytics. A single instance of these records was

retained in our study to create a holistic industry list.

We removed all funds marked as dead funds by third-party information providers. We also

analyzed all reported AUMs at the share-class level and removed all duplicate instances of fund-

level AUMs that were reported multiple times.

Our methodology also included correlation analysis of performance returns to refine: 1) the

fund-level roll-up of investments and, 2) the aggregation of the AUMs of remaining share-

classes into one master, fund-level investment.

To compare hedge funds and FoHFs in a single-currency, all funds that were not denominated

in US Dollars (USD) were converted to USD using the exchange rate valid on June 30, 2012.

PerTrac 2012 6

The number of single-manager hedge funds identified increased in the first half of 2012 to

10,754, an increase of 7.46% from year-end 2011. Nearly 75% of the increase in the number of

funds reporting AUM information is attributable to those with less than $25 million in AUM;

funds managing between $251 million and $500 million in assets were responsible for nearly

11% of this increase. Part of this increase is the result of existing funds being re-categorized into

the $251 - $500 million size tier as a result of AUM fluctuations.

Reported AUM expanded to approximately $1.892 trillion at the end of first half 2012, an

increase of 5.23% from year-end 2011, when it stood at $1.798 trillion. A breakdown in the

number of funds by AUM size in Figure 1 below reveals that 323 funds reported holding assets

in excess of $1 billion.

Figure 1: Number of Single-Manager Hedge Funds by AUM Size at the End of First Half 2012*

4,266

1,114 1,058 1,051

569330 323

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

$1B

Nu

mb

er

of

Fun

ds

Assets Under Management*Figure excludes 2,043 funds that did not report AUM PerTrac 2012

PerTrac 2012 7

Combined, the AUM of billion-dollar-plus funds is approximately $1.146 trillion, or 60.6% of the

single-manager hedge fund total reported AUM. Figure 2 below shows the percent of total AUM by fund size in the first half of 2012.

Figure 2: Percent of Total Single-Manager Hedge Fund AUM by Fund Size at the End of First Half 2012*

60.6%

12.1%

10.7%

8.7%

4.0%2.1% 1.8%

>$1B

$501M - $1B

$251 - $500M

$101 - $250M

$51 - $100M

$25 - $50M

PerTrac 2012 8

In 2011, billion-dollar-plus funds comprised 3.9% of the single-manager hedge fund universe

which reported AUM data; these funds managed a combined $1.08 trillion in assets. At the end of first half of 2012, billion-dollar-plus funds constituted a smaller percentageonly 3.7%of

the single-manager hedge fund universe which reported AUM data, but commanded $1.146 trillion in assets. These findings suggest that investors might have preferred allocating to larger

hedge funds in the first half of 2012. Figure 3 below shows a breakdown of the number of single-manager hedge funds by various AUM tiers in 2011 and first half 2012.

Figure 3: Breakdown of the Number of Single-Manager Hedge Funds by

AUM Tiers in 2011 and at the End of First Half 2012*

47.3% 49.0%

13.6% 12.8%

12.4% 12.1%

12.4% 12.1%

6.3% 6.5%

4.1% 3.8%3.9% 3.7%

2011 First Half 2012

>$1B

$501M - $1B

$251 - $500M

$101 - $250M

$51 - $100M

$25 - $50M

PerTrac 2012 9

Commodity Trading Advisors (CTAs) (included in single-manager

hedge fund totals)

The number of single-manager hedge funds in the study employing CTA strategies was 1,528 at

the end of first half 2012. Combined, these funds reported $438 billion in assets, an increase of

6.05% since year-end 2011. Investors appeared to have allocated to the largest funds , since

CTAs managing in excess of $1 billion in assets accounted for 78.1% of the total reported AUM

at the end of first half 2012, a 1.8% point increase from the end of 2011 when they accounted

for 76.3%. Table 1 below shows AUMs by fund size as a percentage of the total reported CTA

AUM in 2011 and first half 2012.

Table 1: CTA AUMs and Percentage of Total by Fund Size in 2011 and at the End of First Half 2012*

$1B $315 76.3% $342 78.1%

Totals $413 100.0% $438 100.0%

Size of Fund

*Table excludes 130 funds that did not report AUM in 2011 and 131

funds that did not report AUM in first half 2012 PerTrac 2012

2011 First Half 2012

AUM

(in Billions)

% of Total

AUM

AUM

(in Billions)

% of Total

AUM

PerTrac 2012 10

The reported AUM of FoHFs decreased by $22 billion from year-end 2011 through the first half

of 2012 to stand at $425 billion; the number of FoHFs reporting fell from 3,388 to 3,259, a

decline of 3.81% in the same time period. Figure 4 below illustrates the number of FoHFs by

AUM size for the first half of 2012, showing 90 FoHFs reporting over $1 billion in assets.

Figure 4: Number of FoHFs by AUM Size at the End of First Half 2012*

1,310

413 386343

15281 90

0

200

400

600

800

1,000

1,200

1,400

$1B

Nu

mb

er

of

Fun

ds

Assets Under Management

*Figure excludes 484 funds that did not report AUM PerTrac 2012

PerTrac 2012 11

These billion-dollar-plus funds made up only 3.24% of the FoHF universe which reported AUM data, but they accounted for 48.7% (or $207 billion) of the total reported assets in the first half of 2012. Figure 5 below provides a breakdown of the percentage of total AUM by fund size.

Figure 5: Percent of Total FoHF AUM by Fund Size at the End of First Half 2012*

The average reported AUM of the billion-dollar-plus FoHFs was $2.3 billion, which is more than three times the $671 million average of funds with reported AUMs between $501 million and $1 billion.

48.7%

13.3%

12.6%

12.8%

6.5%

3.6% 2.5%

>$1B

$501M - $1B

$251 - $500M

$101 - $250M

$51 - $100M

$25 - $50M

PerTrac 2012 12

The reported AUM continued to be primarily located within single-manager hedge funds in the first half 2012. Figure 6 below provides a breakdown of the total reported AUM by investment

fund type.

Figure 6: Total Reported AUMs and Size Composition by Fund Type in 2011 and at the End of First Half 2012*

$1,385

$413 $447

$1,454

$438 $425

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

Single-Manager Hedge Funds (excluding CTAs)

CTAs Funds of Hedge Funds

Ass

ets

Un

de

r M

anag

em

ent

(in

Bil

lio

ns)

2011 H1 2012

*Figure excludes 2,357 funds in 2011 and 2,527 funds in first half 2012 that did not report AUMPerTrac 2012

PerTrac 2012 13

Excluding CTAs, the reported AUM in single-manager hedge funds was approximately $1.454

trillion, or 63% of the total reported AUM at the end of first half 2012. Including CTAs, the

reported AUM in single-manger hedge funds was approximately $1.892 trillion, or 82% of the

total reported AUM. Alone, CTAs managed about $438 billion, or 19% of the total reported

AUM. FoHFs managed about $425 billion at the end of first half 2012, or 18% of the total

reported AUM as illustrated in Figure 7 below.

Figure 7: AUM Percentage Breakdown by Fund Type in 2011 and at the End of First Half 2012*

Single-

Manager Hedge Funds

(excluding CTAs)63%

CTAs

19%

Funds of Hedge

Funds18%

*Figure excludes 2,527 funds that did not report AUM PerTrac 2012PerTrac 2012

First Half 2012

Single-Manager

Hedge Funds

(excluding CTAs)62%

CTAs18%

Funds of Hedge Funds20%

*Figure excludes 2,357 funds that did not report AUM

2011

PerTrac 2012 14

In the first half of 2012, the number of hedge funds and FoHFs reporting expanded by 4.61% to

14,013 and reported AUM increased by 3.21% to $2.317 trillion. Single-manager hedge funds

experienced a 7.46% rise in their total number of reporting funds from year-end 2011, while

FoHFs endured a decline of 3.81%.

Single-manager hedge funds reported a total AUM of $1.892 trillion and FoHFs reported a total

AUM of $425 billion at the end of first half 2012.

At the end of first half 2012 there were 323 single-manager hedge funds and 90 FoHFs that

reported managing in excess of $1 billion in assets. The billion-dollar-plus single-manager hedge

funds collectively managed $1.146 trillion, or 60.6% of the single-manager hedge fund total

reported AUM; the billion-dollar-plus FoHFs collectively managed $207 billion, or 48.7% of the

FoHF total reported AUM.

CTAs, a subset of single-manager hedge funds, reported a total AUM of $438 billion at the end

of first half 2012, a 6.05% increase since year-end 2011. The billion-dollar-plus CTA funds

reported managing $342 billion, or 78.1% of the CTA total reported AUM. In the first half of

2012, the number of CTAs reporting expanded by 1.26% from year-end 2011.

PerTrac 2012 15

Sizing the Hedge Fund Universe is part of an ongoing focus on providing high quality aggregate

investment information to PerTrac clients and the general investment community. The study

was completed using the PerTrac ID feature in PerTrac Analytics. PerTrac IDs allow users to

combine two or more databases from different data vendors and easily create a universe of

unique funds, hiding duplicate records based upon the users chosen data vendor priority.

PerTrac users gain the benefit of having multiple databases and a larger data sample without

having to manually identify duplicate records. Users are also able to toggle between data

sources to access the full complement of information available on each fund, which often varies

between data vendors even when the same fund is referenced.

PerTrac provides sophisticated software solutions for investment professionals, including

pensions, family offices, hedge funds, long-only managers, endowments, sovereign wealth

funds, funds of hedge funds and industry service providers.

Our solutions span the continuum of the investing process including fund selection, portfolio

construction, portfolio monitoring, performance analysis and risk assessment. Our products

also enhance communication and reporting between investors and fund managers.

More than 1,400 organizations in 50 countries rely on PerTrac software solutions to help them

maximize returns, reduce risk and operate more efficiently.

For more information please visit www.pertrac.com.

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PerTrac 2012 16