ALTERNATIVE ASSET LEVELS CONTINUE TO DROP, ACCORDING TO SURVEY

Posted August 3, 2009

NEW YORK – Combined alternative assets (hedge funds and fund of funds) under management (AUM), plummeted $1.347 trillion to $2.496 trillion as of the end of the first quarter of 2009, according to the fourth annual Carbon360° Fund Administration Fact Book, a report on 130 fund administrators and the alternatives industry.

“At a macro level you can’t deny the impact of the financial services implosion or the resulting recession. This has impacted the whole of the fund administration industry; in fact “the perfect storm” has fully engulfed it”, says Brian Shapiro, Senior Research Fellow, Carbon360°. “Deteriorating capital bases as a result of the credit crunch and subsequent global recession, globally poor performance among managers, fund closures, an unprecedented and continuing pace of redemptions by investors, and an inability to control costs have weighed heavily on the industry.”

The first quarter figure represents a 12-month decline of 37.25 percent from the first quarter of 2008, when the amount was $3.821 trillion. Over the nine months from the third quarter of 2008 to the end of the first quarter of 2009, the alternatives industry saw its greatest decline since Carbon360° began tracking in 1997, losing $703.82 billion in assets through a combination of poor performance and investor redemptions. Fiscal 2008 saw the bulk of the decline with a 28 percent decrease. Through the first quarter of 2009, the industry has seen assets erode another 9.25 percent.

Carbon360° forecast that overall the decline in 2009 will continue to post a fiscal year total of 18.5 percent. Carbon360° estimates that 2009 alternative assets levels will be about $2.242 trillion.

Last year, Carbon360° forecast the smallest growth year ever, projecting only single digit growth of 8 to 9 percent. The Carbon360° Fund Administrator Survey, scheduled to be released as part of the Fund Administration Fact Book, found that among the Top 25 third-party fund administrators, single manager hedge fund assets dropped $730.647 billion to $2.079 trillion, a decline of 26 percent. The decline was greater than expected from the $2.809 trillion reported in the first quarter of 2008.