As of March 2009, Hong Kong hosts 209 active hedge-fund management firms that run a total of 542 funds and $55.3 billion in assets, according to Hong Kong's Securities and Futures Commission (SFC).

The regulator says there are 231 licensed corporations it considers hedge-fund managers; 225 replied to its survey, as the others were in the process of being unwound. Of that 225, another 16 were brand new and hadn't launched their funds as of March 31, so weren't counted.

The SFC polled the industry this autumn for the first time in three years, to gauge its size and character in the wake of the global financial crisis. In March 2008, Hong Kong's hedge funds managed $90.1 billion. Over the next 12 months, the industry lost 39% of its assets under management (AUM).

The wave of redemptions and valuation losses in late 2008 and early 2009 has also reduced the size of the average fund run in Hong Kong.

The SFC didn't break down the differences year to year, but shows that in 2006, when it last compiled such data, 8% of hedge funds ran $1 billion or more; that percentage is now down to 6.3%. Meanwhile, three years ago, 54% of funds ran under $100 million, but that now accounts for 60.7% of hedge funds.

The top 20 hedge funds account for $32.7 billion, or 59.1% of AUM.

If average fund sizes have declined, other quanta have risen. First, the number of actual funds (as opposed to licensed managers) has risen from 296 to 542. The number of funds has increased even in comparison with March 2008 (when there were 488 funds).

Second, the industry now employs 1,967 people in Hong Kong, up from 1,053 in 2006, an increase of 86.8%. Nearly 40% of them are involved in investment management, research and advisory services.

The composition of strategies has broadened, but only so much: almost half (44.3%) of hedge funds are dedicated to equity long/short. Another 18.3% are multi-strategy managers. And 12.5% are funds of hedge funds.

This picture is a little different when measured as a portion of reported net asset values (as opposed to a portion of licensed hedge funds). In NAV terms, multi-strat is the biggest strategy type, at 34%. Equity long/short is in second place, with 25%, and funds of funds account for 15.4%.

What all of these products have in common is their regional focus; Hong Kong is not generally used as a base for global products, unlike Singapore. Hong Kong-focused assets account for 14.7% of the total; pan-Asia strategies account for 23.4%; mainland China for 12.0%; and Japan 9%. Just over a quarter (27.5%) of assets could not be identified on a geographical basis, or were in cash.

If Hong Kong continues to serve as an investment platform for regional allocations, the clientele is global. The Americas account for 49.1% of investments in hedge funds operating in Hong Kong, Europeans for another 34.9%. Hong Kong-domiciled investors account for only 1.9% of assets managed by the city's hedge funds.

Of this global investor base, the most AUM comes from funds of hedge funds (37.6%), followed by rich individuals or family offices (16.6%), financial institutions such as banks or insurers (14.4%), pension funds (11.1%) and endowments or charities (10.3%).

Although Hong Kong's hedge fund industry is predominantly equity long/short or multi-strat, the recent crisis has driven assets into cash, which as of March accounted for 28.5% of AUM. Equities came in second (27.7%), followed by bonds (19.0%). Listed futures and options and over-the-counter derivatives or structured products combined account for another 15.9% of hedge fund assets.

Leverage is also low, with 68.8% of hedge funds reporting leverage of 100% or less, and only 8% reporting leverage of over 200%.

The SFC concludes its survey by acknowledging the growing role of hedge funds in financial markets worldwide, and its own efforts to enforce laws regarding fraud, insider dealing and market misconduct, without directly regulating the industry.