In Q1 2007 HFN’s initial intent in conducting a survey of hedge fund administrators was to use the results in tandem with an internal survey of fund managers to determine the best estimate of the true size of the hedge fund industry. Our methodology is simple: determine the total amount of assets under administration by creating the largest survey of hedge fund administrators then adjust the figure upwards to account for hedge fund assets which are administered “in-house”. HFN created that second estimate by analyzing the funds within its database, the largest database of active hedge fund information in the world, along with a survey of managers to determine what percentage of assets are in fact self administered.

The results clearly show the size and number of single manager funds is significantly larger than most major media outlets continue to report. The survey results show externally administered hedge fund assets of $2.759 trillion. Additionally, the study of self-administered assets shows an estimate of 3.2% of total industry assets are self administered. The result of these two figures is that HFN has a clear methodology to estimate total single manager hedge fund assets had reached $2.848 trillion at the end of Q1 2008.

To be sure that non-hedge fund assets were not included in this estimate, HFN requested administrators report managed accounts and other alternative investment schemes (SICAVs, SICAFs, UCITs) separately. Administrators reported an additional $35 billion in managed accounts, led by HSBC with $15 billion, and an additional $230 billion in other alternative assets under administration, led by Citi with $89 billion. These are reported figures and are not a full indication of the ultimate size of managed account or other alternative assets.

The reporting of these additional assets can be interpreted as a backstop to the total industry estimate. This means that within both the managed accounts figure and other alternative assets figures there likely are assets being managed by hedge funds in the same or very similar manner to how their actual hedge fund products are being run. This means that not only is the global influence of hedge funds significantly greater than many reporting on the industry believe, but it’s influence goes beyond the prominently reported figures that even HFN estimates. It is entirely possible that the hedge fund industry manages assets for investors in some form or another in excess of $3 trillion. As the hedge fund industry continues to grow in size and influence, HFN will continue to keep a finger on its pulse.