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The $1 Billion Club – Largest Hedge Fund Managers Dominate

researchNew York (HedgeCo.Net) – There are currently more than 500 hedge fund managers with $1bn or more in assets under management. With these firms representing approximately 90% of total industry assets, they make up a significant proportion of all capital managed by hedge funds.

In a new study Preqin takes an in-depth look at what it takes to be at the top of the industry and to be part of the “$1bn Club.” With more assets than the next three largest fund managers combined, Bridgewater Associates is the largest hedge fund manager today, with around $157bn in assets under management.

There are some noticeable patterns when looking at the breakdown of strategies employed by fund managers:

  • New York is home to the largest proportion of fund managers with more than $1bn in assets
  • Long/short is by far the most utilized of all the strategies, with around 42% of all funds managed by $1bn Club members using this strategy.
  • Of the funds belonging to managers with $1-4.9bn in assets, 46% use a long/short strategy, compared to 32% of managers with more than $20bn in assets
  • Long/short funds are the most prominent within the overall hedge fund industry; however, often these funds can have a limited capacity as investment opportunities may be restricted by the geography or sector in which the fund principally invests.
  • Outside of long/short, multi-strategy and macro strategies are the most utilized strategies by the largest hedge fund managers
  • The largest fund managers have settled on two approaches – specialization in one core strategy or diversi?cation across several different strategies
  • Forty-six institutions have joined this exclusive club of investors, with more than $1bn invested in hedge funds in the 12 months since Preqin last conducted this study in May 2013. This is an increase compared to the 26 institutional investors that joined the “$1bn Club” between 2012 and 2013, highlighting the fact that many of these large investors are actively increasing their hedge fund allocations
  • Public pension funds are the largest group of investors, in terms of capital invested in hedge funds

Of all fund managers with more than $20bn in assets, 29% offer a single strategy through their funds and 38% offer six or more strategies. The number of $20bn plus managers offering between two and five core strategies is significantly less, with only 8% providing exposure to four or five strategies.

The medium-sized managers are split fairly evenly, with those between $10bn and $19.9bn offering a varying number of strategies. One thing to note is that outside of the $20bn plus managers, very few fund managers offer 10 or more strategies, showing that this approach is essentially exclusively reserved for the largest fund managers. The managers with $1-4.9bn in assets are noticeably more consistent in their strategic approach. Over half of these managers offer just one strategy, with the number steadily declining as the number of strategies offered increases.

Editing byAlex Akesson
For HedgeCo.net
alex@hedgeco.net
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