The International Organization of Securities Commissions (IOSCO) has published its latest biannual Hedge Fund Survey report.  The report uses data that was collected by the following authorities: AMF (France), BaFin (Germany), Central Bank of Ireland, CSSF (Luxembourg), FCA (UK), MAS (Singapore), SEC (United States) and SFC (Hong Kong) and with input from the Cayman Islands Monetary Authority.

The report follows the same broad layout as the 2015 Hedge Fund Survey. Chapter 2 presents an overview, outlining the survey’s objectives and the main improvements of this version. Chapter 3 considers relevant regulatory developments across a number of jurisdictions. Chapter 4 presents the observations of the survey. An outline of the methodology and structure of the survey is included as an annex.

The report makes the following observations:

  • in the two years since the previous results, global assets under management of hedge funds captured by the survey rose 24% to US $3.2 trillion. While this increase may reflect a combination of more widespread reporting across jurisdictions, market performance and net fund subscriptions, however, this is not conclusive from the data;
  • the Cayman Islands continue to be the fund domicile of choice, making up to 53% of the global total by net asset value (NAV). This is largely unchanged from previous years;
  • according to the data of the survey, equity long/short was the most widely used investment strategy, followed by global macro and fixed income arbitrage;
  • gross leverage of the hedge funds in the survey was 7.1x NAV. This figure includes the notional interest rate and foreign exchange derivative contracts. Removing these figures from the data, gross leverage was 3.1x and net leverage was 1.1x;
  • at an aggregate level, there is a considerable liquidity buffer, suggesting that in normal market conditions, hedge funds should be able to meet investor redemptions; and
  • as of the measurement date, 3.8% of hedge fund assets had constrained redemptions through the use of liquidity management tools, such as gates, suspensions or side pockets.

View IOSCO reports on fourth hedge fund survey, 23 November 2017