The net assets of hedge funds based in the Netherlands increased dramatically from €2.9bn in the first quarter of 2009 to €13.3bn in the first quarter of 2011, according to the Dutch central bank (DNB).
The number of Dutch hedge funds took an equally large rise in this two year period, going from 20 to 99 funds. The bank said that most Dutch hedge funds, however, have a limited size - approximately 85% of funds have net assets under €100m.
The increase in Dutch hedge funds' net assets is largely the result of the creation of mutual investment funds by institutional investors such as large pension funds, says the bank.
These funds, called FGRs, absorb investments that pension funds want to transfer away from their own balance sheets, including investments in hedge funds.
Without FGRs, the net assets of Dutch hedge funds increased more modestly from €2.0bn in the first quarter of 2009 to a mere €2.8bn in the first quarter of 2011.
DNB says that the net inflow at these hedge funds excluding FGRs was negligible over the past two years.
Globally, the assets managed by hedge funds amounted to approximately $2,550bn. The reason the bank gives for hedge funds once again reaching their pre-crisis level is the continued diversification of investors' portfolios.
DNB says that "by including hedge funds and other alternative investments in their portfolios, investors aim to reduce the risk in their total investment portfolios, taking into account the lower correlation between returns of hedge funds and traditional investments, such as equities and bonds. The positive returns of hedge funds in the last two years also played an important role."
Another fact that DNB has found in its research of the market is that roughly one-third of the hedge funds in the Netherlands are fund-of-hedge funds. These do not actively pursue an investment strategy of their own but more safely invest in other hedge funds.
The total net assets of Dutch fund-of-hedge funds amounted to €11.2bn in the first quarter of 2011. The bank also says that no less than a staggering 95% of the funds that the fund-of-hedge funds invested in were based abroad.
The remaining hedge funds pursue an active investment strategy. These funds, according to DNB, had joint net assets of €2.1bn in the first quarter of 2011. On average their size did not exceed €35m.
First published 06.07.2011
azeevalkink@wilmington.co.uk
