Hedge Fund Spotlight

VOLUME 9, ISSUE 5 ■ June 2017

alternative assets. intelligent data. HEDGE FUND SPOTLIGHT

EMERGING HEDGE FUNDS: CAN IN THIS ISSUE THEY OUTPERFORM? 14.10% 14.10% First-time funds with a track record of three years or less have made gains of 14.10% over the past 12 months. How FEATURE 2 does this compare to the wider hedge fund industry and Emerging Hedge what appetite do investors have for emerging hedge funds? Funds: Can They Find out more on page 2 Outperform?

FEATURE 6 Hedge Funds and Brexit: One Year On

INDUSTRY NEWS 9 HEDGE FUNDS AND BREXIT: ONE YEAR ON THE FACTS One year ago, two days before the UK EU referendum, ■ Performance 10 Preqin released a report looking at the views of hedge fund Benchmarks managers on this important vote. Here, we look at how ■ Activist Fund 11 Brexit is impacting hedge fund managers one year on from the referendum. Performance ■ California-Based 12 Find out more on page 6 Hedge Fund Investors ■ UCITS Hedge Funds 15 ■ Fund Searches and 17 Mandates JUST RELEASED: CONFERENCES 18 PREQIN SPECIAL REPORT:

PREQIN SPECIAL REPORT: HEDGE FUNDS IN EUROPE HEDGE FUNDS IN EUROPE

JUNE 2017

All data in this newsletter Download Your Copy alternative assets. intelligent data. can be downloaded to Excel for free

Sign up to Spotlight, our free monthly Alt Credit Intelligence European and US Fund Services Awards: Best Data and Information newsletter, providing insights into Provider | Africa Global Funds Awards 2016: Best Research and Data Provider | The Queen’s performance, investors, deals and Award for Enterprise: International Trade | HedgeWeek Global Awards: Best Global Hedge fundraising, powered by Preqin data: Fund Research Provider | CAIA Corporate Recognition Award

SIGN UP www.preqin.com/contact | [email protected] EMERGING HEDGE FUNDS: CAN THEY OUTPERFORM? EMERGING HEDGE FUNDS: CAN THEY OUTPERFORM? We take a look at the hedge fund industry’s emerging managers, defined as small or young funds, to evaluate their performance, the strategies employed, terms and conditions and investors in these funds.

merging managers are an important Fig. 1: Performance of First-Time Funds vs. All Hedge Funds (As at May 2017) Epart of the hedge fund landscape, 16% with investors drawn by their potential to 14.10% 14% offer higher returns among other reasons. 11.91% 12.22% However, the definition of an emerging 12% 10.22% manager will vary from investor to investor; 10% 8.98% what a large pension fund will consider as 8.52% 7.71% 8% an emerging fund may differ from a small 4.47% 5.97% 4.78% Net Return 6% 5.31% family office, for instance. 4.03% 4.07% 2.51 4% 3.98% 3.70% In this article, we examine two ways to 1.62 1.56 1.54 2% group or define emerging hedge funds to 0.83 0.83 assess whether these funds do outperform 0% their established counterparts, what 12 Months 3-Year 5-Year 3-Year 5-Year 3-Year 5-Year Annualized Annualized Volatility Volatility Sharpe Sharpe appetite there is from investors and what Return Return Ratio Ratio options there are for investors looking to allocate capital to emerging managers. The FTFs with ≤$300mn in AUM FTFs with Track Record of ≤3 Years All Hedge Funds criteria we evaluate emerging managers Source: Preqin Hedge Fund Online against are: or as a result of their small size making record of three years or less produce ■■ First-time funds (FTFs) with assets them more vulnerable to capital losses. significantly better returns than both funds under management (AUM) of Therefore, investors expect emerging with $300mn or less in AUM, and the wider $300mn or less; manager hedge funds to generate strong hedge fund industry, delivering a five-year ■■ First-time funds with a track record of returns in order to compensate for the annualized return of 12.22% compared three years or less. higher risk that can be associated with to 8.98% for small first-time funds. Some investing in them. Funds with a track funds have returned significantly more YOUNG FUNDS OUTPERFORM SMALL record of three years or less, and funds than this; for example, Volpoint Fund, LP FUNDS with $300mn or less in AUM, outperform was launched in January 2016, and in Emerging hedge funds may be more prone the wider hedge fund industry over the 12 months to May 2017 has returned to failure, either due to their strategies a 12-month, three-year and five-year 107.31%. being untested through market cycles timeframe (Fig. 1). Funds that have a track

Fig. 2: Rolling 12-Month Returns: First-Time Funds vs. Fig. 3: Three-Year Rolling Volatility: First-Time Funds vs. All Hedge Funds (As at May 2017) All Hedge Funds (As at May 2017)

25% 9% 8% 20% 7% 15% 6% 5% 10% 4% 5% 3%

Three Year Volatility Year Three 2% 12-Month Net Return 0% 1% -5% 0% Jan-12 Jan-16 Jan-17 Jan-13 Jan-14 Jan-15 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 May-12 May-13 May-14 May-15 May-16 May-17 May-12 May-13 May-14 May-15 May-16 May-17 FTFs with ≤$300mn in AUM FTFs with ≤$300mn in AUM FTFs with Track Record of ≤3 Years FTFs with Track Record of ≤3 Years All Hedge Funds All Hedge Funds Source: Preqin Hedge Fund Online Source: Preqin Hedge Fund Online

2 Hedge Fund Spotlight | June 2017 © Preqin Ltd. 2017 / www.preqin.com EMERGING HEDGE FUNDS: CAN THEY OUTPERFORM?

Fig. 4: Hedge Funds by Manager Location: Active First-Time Fig. 5: Hedge Funds by Top-Level Strategy: Active First-Time Funds vs. All Active Hedge Funds (As at May 2017) Funds vs. All Active Hedge Funds (As at May 2017)

100% 2% 1% 1% 1% 6% 4% 100% Niche Strategies 90% 12% 11% Rest of World 9% 10% 10% 15% 90% Multi-Strategy 80% 7% 9% 15% 18% 80% 16% 7% 8% Managed Futures/CTA 70% 22% Asia-Pacific 70% 6% 8% 7% 8% 11% 60% 60% Relative Value Strategies 7% 10% 11% 50% 8% 50% Europe 8% Credit Strategies 40% 40% Event Driven Strategies 70% 67% 30% 30% North America Proportion of Funds Proportion 58% of Funds Proportion 50% 20% 46% 43% Macro Strategies 20% 10% Equity Strategies 10% 0% 0% FTFs with FTFs with All Hedge FTFs with FTFs with Track All Hedge Funds ≤$300mn in Track Record Funds ≤$300mn in Record of ≤3 AUM of ≤3 Years AUM Years

Source: Preqin Hedge Fund Online Source: Preqin Hedge Fund Online

Funds with a track record of three years that have $300mn or less in AUM than any or less show similar volatility to the wider other category. In contrast, just 15% of This indicates hedge fund industry over a three-year emerging managers with a track record that investors, basis. There has also been a convergence of three years or less are based in Europe. on average, may be in the rolling 12-month volatility of these More than two-thirds (70%) of these rewarded with higher groups in 2017 (Fig. 3). In contrast, funds managers are based in North America, with $300mn or less in AUM, which including Aecor Capital Management, returns with lower produce smaller returns over all timeframes which is headquartered in New York and volatility when investing compared to other groups of emerging was established in 2016. It launched its first in first-time funds with managers, exhibit the highest volatility fund, Aecor Fund, at the beginning of this a shorter track record, over a 12-month, three-year and five-year year and employs an event driven strategy. compared with those that period. This indicates that investors, on have smaller AUM. average, may be rewarded with higher Of the 14,621 active hedge funds tracked returns with lower volatility when investing on Preqin’s Hedge Fund Online, the in first-time funds with a shorter track largest proportion (43%) employ an equity As expected, the average minimum record, compared with those that have strategy (Fig. 5). This is also true across the investment required for both types of first- smaller AUM. different categories of first-time funds; time funds is lower than that of their more however, for these funds the proportions established counterparts (Fig. 6). Funds MEET THE EMERGING MANAGERS are slightly higher. Across all fund groups, with a track record of three years or less – Preqin tracks 867 first-time funds with a the largest proportion (16%) of CTAs which have significantly outperformed the track record of three years or less, while are managed by emerging managers wider hedge fund industry on a 12-month, there are more than twice as many (1,759) with funds of $300mn or less in AUM; for three-year and five-year basis – charge first-time funds with $300mn or less in example, Germany-headquartered Catana similar management and performance AUM. Capital launched its debut fund, Catana Big fees to all single-manager hedge funds. In Data, in June 2016. contrast, emerging managers with $300mn As seen in Fig. 4, Europe accounts for a or less in AUM, which outperform the wider larger share (22%) of first-time hedge funds hedge fund sector but to a lesser degree

Fig. 6: Hedge Fund Terms and Conditions: Active First-Time Funds vs. Active Single-Manager Funds Mean Minimum Investment Mean Management Mean Performance Fund Type ($mn) Fee (%) Fee (%) Active FTFs 0.80 1.52 19.23 with ≤$300mn in AUM Active FTFs with Track 1.28 1.58 19.49 Record of ≤3 Years Active Single-Manager Hedge Funds 1.71 1.56 19.50

Source: Preqin Hedge Fund Online

3 Hedge Fund Spotlight | June 2017 © Preqin Ltd. 2017 / www.preqin.com EMERGING HEDGE FUNDS: CAN THEY OUTPERFORM?

than their counterparts with shorter track three years or less. For example, Alvin last few quarters, the beginning of 2017 records, charge both lower management & Fanny B. Thalheimer Foundation and saw investor inflows for the first time in and lower performance fees. France-Merrick Foundation, both based five successive quarters. This has set the in Baltimore, allocate 30% of their AUM to tone for emerging managers in the hedge SIGNIFICANT NUMBERS OF INVESTORS hedge funds and have invested previously fund industry; with the performance of LOOK TO EMERGING MANAGERS in funds with a track record of three years first-time funds stronger than that of the Although first-time funds with a shorter or less. wider hedge fund industry, now could be track record outperform funds with smaller a prime opportunity for new hedge fund AUM, investors exhibit a greater preference Almost all (92%) institutions that invest managers. Notably, younger funds (those for smaller funds than funds with a shorter in hedge funds with a track record of with a track record of three years or less) track record. Nearly three-quarters (72%) of three years or less are based in North have generated strong returns, achieving institutions that are active in hedge funds America (Fig. 8). In contrast, investors in higher net returns than small funds. consider investing in funds with assets funds with $300mn or less in AUM are of $300mn or less (Fig. 7). An example of more geographically diverse: a significant This stronger performance may encourage this is Singapore Management University proportion (38%) are based in Europe; institutional investors to look past the Endowment, which allocates SGD 250mn for example, London-based Clerville risks of these first-time funds and find ($181mn) to the hedge fund industry. Investment Management invests in first- opportunities with emerging managers. However, there is still significant interest in time funds with a requirement of only Indeed, the volatility of the funds with funds with shorter track records. Using data €100mn in AUM. a track record of three years or less has taken from Preqin’s portfolio search tool, lessened and converged with that of the which analyzes investor preferences based OUTLOOK wider hedge fund industry, indicating that on the named fund investments previously There were significant outflows from the investors can access better returns with made, there are 524 investors that are hedge fund industry in 2016; however, comparable investment risk. invested in a fund with a track record of with better overall performance in the

Fig. 8: Investors in Emerging Hedge Fund Managers by Investor Fig. 7: Investor Appetite for Emerging Manager Funds Location 80% 4% 1% 72% 100% 2% 70% 8% 5% 90% Rest of World 60% 80% 70% 50% 38% Asia-Pacific 60% 40% 50% 32% 92% 30% 40% Proportion of Investors Proportion Europe 20% 30% 51% 20%

Proportion of Total No. of Investors No. Total of Proportion 10% 10% North America 0% 0% Investors in FTFs Investors in FTFs Investors in FTFs with Investors in FTFs with with ≤$300mn in AUM with Track Record of ≤3 Years ≤$300mn in AUM Track Record of ≤3 Years

Source: Preqin Hedge Fund Online Source: Preqin Hedge Fund Online

DATA SOURCE:

Preqin’s Hedge Fund Online currently tracks 14,621 active hedge funds, including 1,759 active first-time funds with $300mn or less in AUM and 867 active first-time funds with a track record of three years or less.

Performance metrics were calculated based on an Emerging Manager benchmark which was constructed on a month by month basis where the constituents were considered separately each month. Only funds which meet the Emerging Manager criteria in each given month were included, therefore the same constituent funds will not be present across the entire timeframe considered as they meet and then subsequently grow out of the given criteria.

For more information, please visit: www.preqin.com/hedge

4 Hedge Fund Spotlight | June 2017 © Preqin Ltd. 2017 / www.preqin.com PREQIN GLOBAL DATA COVERAGE alternative assets. intelligent data.

FUNDS OPEN TO INVESTORS FUNDS WITH FIRMS FUNDS DEALS & EXITS ALTERNATIVES INVESTMENT MONITORED PERFORMANCE COVERAGE 27,284 49,361 19,882 14,399 25,374 279,736

PRIVATE NATURAL HEDGE FUNDS REAL ESTATE INFRASTRUCTURE PRIVATE DEBT EQUITY* RESOURCES 6,581 5,201 5,753 3,070 2,699 2,734 INVESTOR Active Active Active Active Active COVERAGE Active Private Equity Hedge Fund Real Estate Infrastructure Private Debt Natural Resources Investors Investors Investors Investors Investors Investors

FUND 17,439 24,138 6,434 1,148 2,304 1,653 COVERAGE Private Equity Hedge PE Real Estate Infrastructure Private Debt Natural Resources Funds Funds Funds Funds Funds Funds

FIRM 11,523 8,939 3,888 513 1,475 946 COVERAGE Private Equity Hedge Fund PE Real Estate Infrastructure Private Debt Natural Resources Firms Firms Firms Firms Firms Firms

PERFORMANCE 5,841 16,321 1,676 230 808 498 COVERAGE Private Equity Hedge PE Real Infrastructure Private Debt Natural Resources Funds Funds Estate Funds Funds Funds Funds

FUNDRAISING 1,954 16,773 1,086 269 306 376 COVERAGE Private Equity Hedge PE Real Infrastructure Private Debt Natural Resources Funds Funds Estate Funds Funds Funds Funds

BUYOUT VENTURE CAPITAL REAL ESTATE INFRASTRUCTURE DEALS & EXITS COVERAGE 80,464 135,415 37,056 26,801 Buyout Deals** and Exits Venture Capital Deals*** and Exits Real Estate Deals Infrastructure Deals

Alternatives Investment Consultants Funds Terms Coverage: Analysis Best Contacts: Carefully Selected from Coverage: Based on Data for Around our Database of over 562 16,286 400,821 Consultants Tracked Funds Contacts + PLUS THE PREQIN DIFFERENCE Comprehensive coverage of: + Over 250 research, support and development staff + Placement Agents + Dry Powder + Global presence - New York, London, Singapore, San Francisco, + Fund Administrators + Compensation Hong Kong and Manila + Law Firms + Plus much more... + Depth and quality of data from direct contact methods + Debt Providers + Unlimited data downloads + The most trusted name in alternative assets *Private equity includes buyout, growth, venture capital, turnaround, private equity fund of funds, private equity secondaries, direct secondaries, balanced, hybrid, hybrid fund of funds, PIPE, co-investment and co-investment multi-manager funds. **Buyout deals: Preqin tracks private equity-backed buyout deals globally, including LBOs, growth capital, public-to-private deals, and recapitalizations. Our coverage does not include private debt and mezzanine deals.

***Venture capital deals: Preqin tracks cash-for-equity investments by professional venture capital fi rms in companies globally across 2015 Annual CAIA Corporate all venture capital stages, from seed to expansion phase. The deals fi gures provided by Preqin are based on announced venture apitalc �e�o�ni� on Award Winner rounds when the capital is committed to a company. As at 5th June 2017 HEDGE FUNDS AND BREXIT: ONE YEAR ON HEDGE FUNDS AND BREXIT: ONE YEAR ON One year ago, two days before the UK EU referendum, Preqin released a report looking at the views of hedge fund managers on this important vote. At the time, we found that 71% of hedge fund managers predicted that the UK would choose to remain in the EU. However, with a small majority of 52% of the UK populace voting for Brexit, the UK is now on course to leave the EU by March 2019.

Here, we look at the impact of Brexit on the hedge fund industry one year on from the referendum. Preqin surveyed hedge fund managers in June, July and November 2016 and in June 2017 to assess how the UK’s decision to exit the EU is affecting the hedge fund industry in terms of their investments and performance as well as where they choose to be headquartered.

SIZE OF THE HEDGE FUND INDUSTRY (AS AT MARCH 2017)

409 596 $464bn $121bn of the 774 EU-based institutional of the 974 EU-based hedge fund UK EU* managers are UK based. investors in hedge funds are UK headquartered.

*Excluding UK.

Fig. 1: Number of UK- vs. EU*-Based Hedge Fund Launches by Year of Inception, 2000 - 2017 YTD (As at June 2017) 350

300 110 94 250 105 92 110 73 89 200 92 88 54

150 69 61 216 217 No. of Fund Launches of Fund No. 100 42 31 208 191 191 172 170 164 40 147 148 33 50 109 118 20 81 84 53 33 45 7 0 33 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year of Inception YTD UK EU

Source: Preqin Hedge Fund Online

6 Hedge Fund Spotlight | June 2017 © Preqin Ltd. 2017 / www.preqin.com HEDGE FUNDS AND BREXIT: ONE YEAR ON

Fig. 2: UK-Based Hedge Fund Manager Views on whether Brexit Fig. 3: Hedge Fund Manager Views on the Impact of Brexit on Will Lead to a Change in Location of Their Business Operations Their Business 100% 100% Do Not Anticipate 15% 14% 90% 90% Changing Location 80% 80% 70% Will Change Location to 69% 70% 60% 70% outside the UK/EU 60% 80% 81% 50% 71% 79% Will Change Location to 50% 40% Elsewhere in the EU 30% 40% 20% Considering Moving of Respondents Proportion 30% 31% 6% Operations outside the UK 10% Proportion of Respondents Proportion 13% 7% 20% 3% 4% 0% 24% 4% Uncertain All Hedge UK-Based Hedge Rest of EU-Based 10% 17% 12% Fund Managers Fund Managers Hedge Fund Managers 0% Jul-16 Nov-16 Jun-17 Negative Impact No Impact Positive Impact Source: Preqin Hedge Fund Manager Surveys, 2016 - 2017 Source: Preqin Hedge Fund Manager Survey, June 2017

Our June 2017 survey reveals that 8% of UK-based hedge Despite a small, but significant, proportion (8%) of UK-based fund managers plan to move out of the UK as a direct result hedge funds planning to leave the UK as a result of Brexit, 79% of Brexit. Over the second half of 2016 we saw more managers of UK-based firms believe Brexit will have no impact on their consider an exit from Britain because of Brexit; a year on from business, although more UK-based hedge funds believe the the vote these plans have become more concrete for a small impact of Brexit has been positive (14%) for their business than number of managers. negative (7%).

Despite this, the majority (81%) of UK-based hedge funds have In contrast, a larger proportion (31%) of managers in the EU no plans to leave Britain. (excluding the UK) are experiencing negative consequences as a result of Brexit and none have seen any positive impact on their business operations as a result.

Fig: 4: Hedge Fund Manager Views on the Impact of Brexit on Fig. 5: Hedge Fund Managers Views on the Impact of Brexit on Their Future Investments in the UK and EU Their Performance 25% 70% 22% 60% 20% 19% 50% 15% 34% 15% 14% 40% 21% 12% 12% 11% 3% 30% 10% 8% 17% 20% 17% 32% 33% 5% 27% Proportion of Respondents Proportion Proportion of Respondents Proportion 10% 17% 9% 0% 0% Will Make More Will Make Fewer Will Make More Will Make Fewer Impacted Impacted Impacted Impacted Expected Investments in Investments in Investments in Investments in over Directly over over Impact the UK the UK the EU the EU H1 2016 after Vote H2 2016 H1 2017 over Next 12 Months Nov-16 Jun-17 Positive Impact Negative Impact Source: Preqin Hedge Fund Manager Survey, November 2016 and June 2017 Source: Preqin Hedge Fund Manager Surveys, 2016 - 2017

Although a significant proportion of hedge fund managers in Not only are hedge fund managers planning increased the rest of the EU are experiencing negative consequences as a investment in the EU and UK as a result of Brexit, they are result of Brexit, hedge fund managers globally have become expecting it to have a positive impact on their performance more bullish in regards to their investments in the region. over the next 12 months, as the ramifications become clearer. In our November 2016 survey, more fund managers (15%) planned to reduce their exposure to the EU than planned to Over the first half of 2017, 34% of fund managers reported that increase it (12%); this trend has reversed in 2017, and today we Brexit had impacted their performance, a decline from 53% in see nearly 3x the number of managers planning to increase H2 2016. their investments in the EU than reduce them (22% vs. 8% respectively).

Similarly, more fund managers (14%) plan increased investment For more free hedge fund research, data and tools, please visit our in the UK than to reduce their holdings in the country (11%). Research Center: However, the proportion of hedge funds planning increased investment in the UK has fallen since November 2016. www.preqin.com/research

7 Hedge Fund Spotlight | June 2017 © Preqin Ltd. 2017 / www.preqin.com Preqin Mobile For Investment Professionals on the Go Private Equity ■ Real Estate ■ Hedge Funds

Quickly prepare for meetings with  investors or managers while on the road

Easily access key investor or  manager info during internal meetings

Swiftly fi nd key investor and  manager information when putting together presentations

Key Data Sets:

Investors: - Assets, allocations, fund portfolios, typical investment amounts, future plans and more

Fund Managers: - Strategies, funds, fund terms, performance, known investors and more

alternative assets. intelligent data. INDUSTRY NEWS INDUSTRY NEWS

We review the latest news from the hedge fund industry, including California-based investors planning new investments in the coming year, as well as new North America-based hedge funds launched so far in 2017. Plus, our Chart of the Month looks at industry asset flows since 2015.

CALIFORNIA-BASED INVESTORS  PLANNING NEW INVESTMENTS CHART OF THE MONTH

California-based investors target a Hedge Fund Asset Flows vs. Total Size of Hedge Fund Industry, Q1 2015 - Q1 2017 range of hedge fund strategies across 60 3,400 various locations (see page 12 for more 50 +47.5 3,350 information). Sacramento County Total ($bn) Size of Industry 40 Employees’ Retirement System (SCERS) +28.8 30 3,300 is looking to invest between $25mn and +19.7 20 3,250 $75mn in new funds over the next 12 10 +3.9 months. The pension fund is not targeting 3,200 0 any specific fund strategies, and it will look -10 3,150 for opportunities on a global basis. ($bn) Flows Asset -8.9 -20 -14.3 -19.9 3,100 -30 In the coming year, Silicon Valley 3,050 -40 -32.5 Community Foundation (SVCF) plans to -50 -43.1 3,000 invest up to $30mn in hedge funds. The Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 foundation is targeting hedge funds that employ long/short equity strategies. 2015 2016 2017 Asset Flows ($bn) Total Size of Industry ($bn) Source: Preqin Hedge Fund Online RECENT NORTH AMERICA-BASED HEDGE FUND LAUNCHES Asset flows have experienced a dramatic shift in the past two years. The beginning of 2015 saw significant inflows; however, these turned into outflows for five successive There have been 11 hedge funds launched quarters from Q4 2015 and throughout 2016. Despite this, between Q1 2015 and Q2 by North America-based managers 2016 the total size of the hedge fund industry remained around the $3.15tn mark, since the beginning of 2017, including despite these changes in asset flows. Notably, the size of the industry has increased Cerebellum Capital’s Cerebellum Machine significantly in the last three quarters despite hedge funds experiencing heavy Learning Fund, L.P., which was established outflows: Q4 2016 saw outflows of $43bn while the total size of the industry grew to in April. The fund uses artificial intelligence $3.2tn. This indicates that hedge funds have made strong gains to offset the capital to select positions in its portfolio and withdrawn by investors. employs a multi-strategy approach with a focus on US markets. been established in 2017 so far. California- based Arts & Sciences was established SHARE YOUR NEWS Legion Partners Special Opportunities V earlier this year, led by former Smithwood is an activist fund launched in February Advisors Partner Cyrus Hadidi. It plans to Do you have any news you would by Legion Partners Asset Management. It pursue a long/short equity strategy and, like to share with the readers utilizes event driven strategies and takes to a lesser extent, distressed debt and of Spotlight? Perhaps you’re positions in small- and mid-cap North corporate junk bonds. about to launch a new fund, have implemented a new investment American companies. strategy, or are considering Parplus Partners, a New York- investments beyond your usual NEW NORTH AMERICA-BASED FUND headquartered hedge fund manager, geographic focus? MANAGERS launched this year with original backing from Ronin Capital. It employs event Send your updates to The majority (67%) of all active hedge driven, long/short equity, macro and [email protected] and we will fund managers are located in North relative value arbitrage strategies and endeavour to publish them in the America (see page 3). Preqin’s Hedge focuses on the European and US markets. next issue. Fund Online currently tracks 20 managers headquartered in the region that have

9 Hedge Fund Spotlight | June 2017 © Preqin Ltd. 2017 / www.preqin.com THE FACTS PERFORMANCE BENCHMARKS

Fig. 1: Summary of Preliminary May 2017 Performance Benchmarks (Net Return, %)* May-17 Apr-17 2017 YTD 12 Months Hedge Funds 0.23 0.79 4.35 10.31 HF - Equity Strategies 0.46 1.00 5.85 12.34 HF - Event Driven Strategies 0.24 1.02 4.65 14.35 HF - Relative Value Strategies -0.44 0.25 1.25 4.57 HF - Macro Strategies -0.13 0.12 1.18 5.25 HF - Multi-Strategy 0.16 0.75 4.18 9.00 HF - Credit Strategies 0.21 0.54 3.40 9.37 Activist 0.32 1.11 5.25 15.44 Volatility 0.60 0.61 3.16 7.14 Discretionary 0.14 0.91 4.72 11.75 Systematic 0.39 0.66 3.67 7.63 HF - North America -0.15 0.63 3.27 11.54 HF - Europe 1.00 1.17 5.20 8.81 HF - Asia-Pacific 0.83 0.62 6.14 9.89 HF - Developed Markets 0.34 0.59 2.94 8.74 HF - Emerging Markets 0.05 1.34 6.93 14.04 HF - Emerging (Less than $100mn) 0.10 0.70 4.11 10.59 HF - Small ($100-499mn) 0.16 0.82 4.15 10.20 HF - Medium ($500-999mn) 0.81 0.90 4.43 10.94 HF - Large ($1bn plus) 0.52 0.84 4.44 9.66 Funds of Hedge Funds 0.23 0.53 2.04 4.22 FOHF - Equity Strategies 0.40 0.95 4.77 6.84 FOHF - Multi-Strategy 0.15 0.44 2.36 4.59 Funds of CTAs -0.74 0.15 -0.95 -2.91 FOHF - USD 0.16 0.54 2.84 5.21 FOHF - EUR 0.36 0.41 0.16 0.93 Alternative Mutual Funds 0.08 0.32 2.05 4.19 UCITS 0.46 0.61 3.47 5.22 UCITS - Equity Strategies 0.77 0.92 5.79 7.94 UCITS - Relative Value Strategies 0.50 0.19 1.45 1.42 UCITS - Macro Strategies 0.10 0.25 1.51 3.73 UCITS - USD 0.72 0.85 4.96 6.58 UCITS - EUR 0.19 0.48 2.60 3.97 CTAs 0.54 -0.40 -0.03 -0.79 Discretionary -0.18 1.27 0.82 3.12 Systematic 0.63 0.32 0.42 -0.22 CTA - USD 0.30 0.32 0.21 -0.23 CTA - EUR 0.76 0.90 1.54 1.75 Source: Preqin Hedge Fund Online *Please note, all performance information includes preliminary data for June 2017 based on net returns reported to Preqin in early May 2017. Although stated trends and comparisons are not expected to alter significantly, final benchmark values are subject to change.

edge funds generated a small positive return (+0.23%) Fig. 2: 12-Month Cumulative Returns of Hedge Funds Hfor May 2017, the seventh consecutive month of positive by Currency Denomination (As at May 2017) performance. Equity strategies funds were the biggest winner for 20% May having posted returns of +0.46%, helping bring the Preqin 17.0% All-Equity Strategies Hedge Fund benchmark to +5.85% for 2017 15% YTD, the highest of any top-level strategy. Europe- and Asia-Pacific- 10% 10.8% focused funds also performed well in May returning +1.00% and 8.6% +0.83% respectively. 5.7% 5% 5.1% Returns across various currency denominations for May were Cumulative Net Return Cumulative 0% mixed, with JPY-denominated funds generating the highest return of +1.01%. This comes after the currency depreciation of the -5% Japanese yen increased external demand for exports, helping to

boost growth of the Japanese economy. Meanwhile the corruption Jul-16 Jan-17 Oct-16 Jun-16 Apr-17 Feb-17 Sep-16 Mar-17 Dec-16 Nov-16 Aug-16 scandal surrounding Brazilian President Michel Temer may have May-17 USD EUR GBP JPY BRL contributed to the loss posted by Brazilian real funds of -1.17%. Source: Preqin Hedge Fund Online

10 Hedge Fund Spotlight | June 2017 © Preqin Ltd. 2017 / www.preqin.com THE FACTS ACTIVIST FUND PERFORMANCE

We examine the performance of activist hedge funds, including launches in 2017 and top performing activist hedge funds by 12-month return.

Fig. 1: Performance of Activist Hedge Funds vs. All Hedge Funds Fig. 2: Rolling 12-Month Returns: Activist Hedge Funds vs. (As at May 2017)* S&P 500 PR Index

16% 15.61% 35% 30% 14% 25% 12% 20% 10.33% 9.98% 10.02% 10% 15% 10% 8% 7.73% 5% 5.42% 5.97% Net Return 6% 5.34% 0%

4.36% 4.00% 12-Month Net Return 4% -5% -10% 2% -15% 0% 2017 YTD 12 Months 3-Year 5-Year 3-Year Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Annualized Annualized Volatility May-11 May-12 May-13 May-14 May-15 May-16 Activist Hedge Funds All Hedge Funds Activist Hedge Funds S&P 500 PR Index Source: Preqin Hedge Fund Online Source: Preqin Hedge Fund Online Fig. 3: Rolling Three-Year Annualized Returns of Activist Hedge Fig. 4: Drawdowns of Activist Hedge Funds vs. S&P 500 PR Index Funds by Geographic Focus (As at May 2017) 25% Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 20% 0% -2% 15% -4% -6% 10% -8% -10% 5% Three-Year Annualized Return Annualized Three-Year

Drawdown Size Drawdown -12%

0% -14% -16% Jul-14 Jul-15 Jul-16 Jan-14 Jan-15 Jan-16 Jan-17 Oct-14 Oct-15 Oct-16 Apr-14 Apr-15 Apr-16 -18% North America Europe Asia-Pacific Activist Hedge Funds S&P 500 PR Index Source: Preqin Hedge Fund Online Source: Preqin Hedge Fund Online Fig. 5: Sample Activist Hedge Funds Launched in 2017

Fund Inception Date Geographic Focus Manager Location Bentham IMF 1 Feb-17 North America US Fir Tree Capital Opportunity Master Fund III Jan-17 North America US Standard General Fund II Feb-17 North America US

Source: Preqin Hedge Fund Online Fig. 6: Top Performing Activist Hedge Funds by 12-Month Net Return (As at May 2017)*

Fund Manager Manager Location 12-Month Net Return (%) Guepardo Master Fund Guepardo Investimentos Brazil 47.27 Doric Asia Pacific Small Cap Fund - Series 1 (Base) Doric Capital Corporation Hong Kong 45.06 FAMA Brazil Cayman Feeder Fund FAMA Investimentos Brazil 35.22 UG Hidden Dragon Special Opportunity Fund - Class A UG Investment Advisers Taiwan 34.05 Teleios Global Opportunities Fund, Ltd Teleios Capital Partners Switzerland 30.25

Source: Preqin Hedge Fund Online *Please note, all performance information includes preliminary data for June 2017 based on net returns reported to Preqin in early May 2017. Although stated trends and comparisons are not expected to alter significantly, final benchmark values are subject to change.

11 Hedge Fund Spotlight | June 2017 © Preqin Ltd. 2017 / www.preqin.com THE FACTS CALIFORNIA-BASED HEDGE FUND INVESTORS We examine the make-up of hedge fund investors based in California by type, location, strategy preference and more.

Geographic Preferences of California- Fund Type Preferences of California- California-Based Hedge Fund Investors Based Investors Active in Hedge Funds: Based Investors Active in Hedge Funds: that Will Invest with Emerging Managers: 91% 18% 31% 46% 44% 50% 38% 32% 23%

Direct Will Invest North Europe Asia Both Direct and Fund of Consider Investing America Hedge Funds Will Not Invest Fund of Hedge Funds

Fig. 2: Number of Active Hedge Fund Investors based in the Top Fig. 1: California-Based Hedge Fund Investors by Type Five Locations in California

Foundation 15% Endowment Plan 19%65 30% Private Sector Private Pension Fund San Francisco 10% Wealth CALIFORNIA Fund of Hedge 19%12 Funds Manager 19%14 4% Public Pension Menlo Park Fund Palo Alto 7% Institutional Other 13% Family Office 19%44 10% Wealth Manager 19%18 12% Los Angeles San Diego Source: Preqin Hedge Fund Online Source: Preqin Hedge Fund Online

Fig. 3: Strategy Preferences of California-Based Investors Active Fig. 4: Five Largest California-Based Investors by Current in Hedge Funds Allocation to Hedge Funds 80% 71% Current 70% Allocation to Investor Type Location Hedge Funds 60% 54% 50% ($bn) 50% 43% 40% 40% 38% Regents of the Public 33% 30% Oakland 6.1 30% University of California Pension Fund 20% 19% Stanford Management Endowment 20% Stanford 5.2

Proportion of Investors Proportion 10% Company Plan 0% Multi-Family CTC myCFO Palo Alto 5.0 Office

Macro California State Public

Distressed Teachers' Retirement Sacramento 3.6 Neutral CTA

Arbitrage Pension Fund Event Driven

Fixed Income System (CalSTRS) Equity Market Relative Value Multi-Strategy

Long/Short Credit Kaiser Permanente Private Sector Long/Short Equity Managed Futures/ Managed Oakland 2.6 Pension Plan Pension Fund Strategy Preference Source: Preqin Hedge Fund Online Source: Preqin Hedge Fund Online

12 Hedge Fund Spotlight | June 2017 © Preqin Ltd. 2017 / www.preqin.com HOW PREQIN CAN HELP YOU FUNDRAISE IN 2017

Although there are more institutional investors than ever currently investing in hedge funds – over 5,100 globally – fundraising in 2017 is undoubtedly challenging. The net outflows of $110bn seen in 2016 look set to continue in 2017: twice as many investors plan to reduce their exposure to hedge funds over the coming year than plan to increase it.

Despite this, there are opportunities to grow your fund over the course of 2017 – with industry-leading data and tools, Preqin will help you in finding those investors looking for new hedge funds today.

PREQIN IS HELPING RAISE CAPITAL FOR HEDGE FUNDS TODAY

5 0 4 8 1 4 1 6 6 4 8 8 8 5 9 6 6 1 6 3 1 5 5 4 6 6 3 5 6 4 7 8 5 0 2 0 4 7 5 8 3 1 7 5 6 5 0 7 4 7 2 2 4 3 3 0 8 9 7 4 4 1 4 5 9 5 3 9 5 0 4 5 0 5 7 6 9 3 6 5 4 1 8 7 2 7 2 1 1 8 1 7 0 8 6 8 4 0 9 4 2 6 4 6 6 3 0 2 4 8 6 8 1 0 1 6 4 9 8 4

6,000 9 2.5x investment professionals in out of the top Preqin clients raised more than twice as much capital in 2016 than all 90+ 10 other funds*. countries use Preqin’s data. hedge funds that saw the largest inflows in 2016 rely on Preqin data.

HOW PREQIN HELPS TO RAISE CAPITAL FOR HEDGE FUNDS

We have With researchers on the ground, Preqin is the Our fully searchable database allows you to first to find out the latest hedge fund searches target those investors interested in your fund 250 among the and to find contact details for more than multilingual research analysts based in the US, London, Hong Kong and Singapore. 5,100+ 12,000 institutions tracked by Preqin globally. key decision makers at these institutions. Each month our team have thousands of conversations with investors to find out more about their alternative investments.

*Of the firms that saw inflows in 2016, Preqin clients, on average, raised $116mn compared to $48mn for all other funds.

alternative assets. intelligent data. HOW PREQIN CAN HELP YOU FUNDRAISE IN 2017

PREQIN CAN HELP RAISE CAPITAL FOR YOUR HEDGE FUNDS IN 2017

798 799 800 801 802

Investors have indicated they are looking for The average hedge fund investor looking to With over up to make new investments in the next 12 months plans to invest between 5,100 800 investors profiled on the Preqin platform, we new hedge funds in the $62mn can help pinpoint those investors that are next 12 months. and looking for you. $85mn

TAILOR YOUR PITCH USING PREQIN DATA

Forward-looking data Strategy, fund type and AUM and track record Full contact details for key Fund-level investments on future plans and full geographic preferences for requirements of investors decision makers, including on a named basis to see investment history of each each institution. in hedge funds. the best method to who they have invested institution. approach the investor. with and how that fund is performing.

Hedge Fund Online is Preqin’s award-winning hedge fund information resource, incorporating all of our hedge fund data, intelligence and functionality, providing you with the most comprehensive coverage of the asset class available.

www.preqin.com/demo

alternative assets. intelligent data. THE FACTS UCITS HEDGE FUNDS

We examine the latest data on UCITS hedge funds, including launches and liquidations, fund managers over time and assets under management. Fig. 1: UCITS Hedge Fund Launches and Liquidations over Time, Fig. 2: Active UCITS Hedge Fund Managers over Time, 2002 - 2017 YTD (As at June 2017) 2002 - 2017 YTD (As at June 2017) 200 500 450 436 440 150 176 420 141 141 400 388 137 363 100 128 123 103 101 350 333 310 50 55 60 300 250 30 38 16 0 15 250 10 6 -21 -5 -57 -63 -72 -53 200 179 -50 No. of Launches/Liquidations No. 150 135 102 -100 100 77 62 48 No. of Active UCITS Fund Managers Fund UCITS of Active No. 37 45

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 50

2017 YTD 2017 0 Year of Inception/Liquidation Jun-04 Jun-07 Jun-10 Jun-13 Jun-16

Launches Liquidations Sep-03 Sep-06 Sep-09 Sep-12 Sep-15 Mar-05 Mar-08 Mar-11 Mar-14 Mar-17 Dec-02 Dec-05 Dec-08 Dec-11 Dec-14 Source: Preqin Hedge Fund Online Source: Preqin Hedge Fund Online Fig. 4: Active UCITS Hedge Funds by Core Strategy Fig. 3: Active UCITS Hedge Funds by Domicile (As at June 2017) (As at June 2017)

4% 1% 2% 12% Equity Strategies 8% Luxembourg Macro Strategies 7% Ireland Event Driven Strategies 40% France Credit Strategies 10% Relative Value Strategies 54% Germany 32% Managed Futures/CTA Other Multi-Strategy 15% Niche Strategies 4% 12%

Source: Preqin Hedge Fund Online Source: Preqin Hedge Fund Online

Fig. 5: Active UCITS Hedge Funds by Assets under Management Fig. 6: Hedge Fund Fees: UCITS vs. Commingled Funds (As at June 2017) Mean Management Mean Performance Structure 60% 57% Fee Fee Commingled Hedge 1.57% 19.33% 50% Funds UCITS Hedge Funds 1.29% 16.05% 40% Source: Preqin Hedge Fund Online

30% 29%

Proportion of Funds Proportion 20%

8% 10% 6%

0% Less than $100mn $100-499mn $500-999mn $1bn or More Assets under Management

Source: Preqin Hedge Fund Online

15 Hedge Fund Spotlight | June 2017 © Preqin Ltd. 2017 / www.preqin.com Preqin subscribers receive 15% discount using code ‘PQ15’

ToTal alTs 2 017 an exploration of alternative investments september 7-8, 2017 | san Francisco, Ca

Early Confirmed Speakers include:

Kathleen Kennedy Townsend, Managing Director, The Rock Creek Group Stuart Fiertz, Co-Founder and President, Cheyne Capital Management Bruce Richards, Co-Managing Partner and CEO, Marathon Asset Management Briant Lahart, Managing Director, Asset Management, Abbot Downing Ed Rzeszowski, Managing Director, BlackRock

www.imn.org/totalalts | [email protected] | (212)224-3207 THE FACTS FUND SEARCHES AND MANDATES We analyze the fund searches and mandates issued by hedge fund investors in May 2017.

Fig. 1: Hedge Fund Searches Issued by Investor Location, May 2017 Fig. 2: Hedge Fund Searches Issued by Investor Type, May 2017 Fund of Hedge Funds Manager 2% 2% Family Office 2% 2% 12% 2% 2% Asset Manager 3% North America 4% Private Sector Pension Fund

Bank Europe 10% 52% Corporate Investor Asia-Pacific & Rest of 36% Insurance Company World 71% Investment Company

Public Pension Fund

Wealth Manager

Source: Preqin Hedge Fund Online Source: Preqin Hedge Fund Online

Fig. 3: Hedge Fund Searches Issued by Strategy, May 2017 70% DATA SOURCE: 60% 58% Subscribers to Hedge Fund Online can click here to view 50% detailed profiles of 392 institutional investors in hedge 40% funds actively searching for new investments via the Fund 30% 27% Searches and Mandates feature on Preqin’s Hedge Fund 23% 19% 19% Online. 20% 15% 15% 15% 15% 12% 10%

Proportion of Fund Searches of Fund Proportion Preqin tracks the future investment plans of investors in 0% hedge funds, allowing subscribers to source investors actively seeking to invest capital in new hedge fund

Macro investments. Credit Equity Long Bias Distressed CTA Long/Short Long/Short Event Driven Fixed Income Commodities

Multi-Strategy Not yet a subscriber? For more information, or to arrange

Managed Futures/ Managed a demonstration, please visit: www.preqin.com/hedge Source: Preqin Hedge Fund Online

Fig. 4: Sample Hedge Fund Searches Issued, May 2017 Investor Type Location Investment Plans for Next 12 Months The investment company plans to invest up to £40mn in 5-7 funds over the coming year on Optimized Portfolio Investment Sweden a global basis, including macro, long/short equity, managed futures/CTA, event driven and Management Company equity market neutral funds. The fund of hedge funds plans to add five new funds to its portfolio in the next 12 months, Fund of Hedge allocating a total of ZAR 80mn specifically to bond and fixed income strategies. It will focus its AlphaWealth South Africa Funds Manager investments on emerging markets domestically and globally, particularly looking at Europe, Japan and China. The California-based family office plans to invest between $300mn and $400mn both directly Multi-Family in hedge funds and in funds of hedge funds over the next year. It will focus on long/short CTC myCFO US Office equity, relative value arbitrage and event driven strategies on a global basis. It will invest with a mix of both new and existing managers.

Source: Preqin Hedge Fund Online

JULY 2017

Conference Dates Location Organizer Preqin Speaker Discount Code Investment Alternative Investment Consultants $300 Discount - 20 July 2017 Stamford, CT Management - Summit IMICT165 Institute Family Office & Private Wealth Opal Financial 24 - 26 July 2017 Newport, RI - - Management Forum 2017 Group

SEPTEMBER 2017

Conference Dates Location Organizer Preqin Speaker Discount Code Total Alts 2017 7 - 8 September 2017 San Francisco, CA IMN TBC - AIMA Australia Annual Forum 2017 12 September 2017 Sydney AIMA - - CTA Expo Chicago 14 September 2017 Chicago, MA CTA Expo Amy Bensted - Cap Intro: L/S Equity | Event Driven Catalyst Financial 18 September 2017 New York - - Alternative Investing Partners Ai CEO Institutional Investment 18 September 2017 New York Africa Investor - - Summit 2017 AIMA Canada Investor Forum 2017 25 September 2017 Montréal AIMA - - UCITS & AIDMD London 26 - 27 September 2017 London KNect365 - - Amy Bensted Channel Islands Funds Forum 2017 27 September 2017 Jersey BL Global - Tom Carr

OCTOBER 2017

Conference Dates Location Organizer Preqin Speaker Discount Code marcus evans Australian Investors Summit 2017 5 - 6 October 2017 Sydney - - Summits Latin Private Wealth Management marcus evans 9 - 10 October 2017 Cancún - - Summit Summits FundForum Middle East & Africa 9 - 11 October 2017 Dubai KNect365 - - Cap Intro: Credit | Fixed Income Catalyst Financial 16 October 2017 New York - - Alternative Investing Partners C4K Investors Conference 18 - 19 October 2017 Toronto Capitalize for Kids - - Family Office & Private Wealth Opal Financial 25 - 27 October 2017 Napa, CA - - Forum – West Group Private Wealth Management Summit 30 October - 1 marcus evans Macao - - APAC 2017 November 2017 Summits

NOVEMBER 2017

Conference Dates Location Organizer Preqin Speaker Discount Code Hedge Fund Investor Leadership 2 - 3 November 2017 New York Agecroft Partners - - Summit 9th Annual Women’s Alternative 2 - 3 November 2017 New York Falk Marques Group - - Investment Summit (WAIS) Quant World Canada 2017 9 November 2017 Toronto Terrapinn - -

TOTAL ALTS 2017

DATE: 7 - 8 September 2017 INFORMATION: www.imn.org/totalalts LOCATION: San Francisco, CA ORGANIZER: IMN Total Alts will reflect the growth and dynamism of the wider world of alternatives and will provide LPs with access to insights from the sharpest minds in private equity, venture capital, private debt, real assets, hedge funds and so much more!

Join us this September 7-8 at the Ritz-Carlton in San Francisco, as we explore and explain the ever-growing and evolving alternative investments landscape.

CATALYST CAP INTRO: L/S EQUITY | EVENT DRIVEN INVESTING

DATE: 18 September 2017 INFORMATION: http://catalystforum.com/events/ls-equity-event-alternative-investing/ LOCATION: New York City ORGANIZER: Catalyst Financial Partners Catalyst Cap Intro events are investor driven and transactional events that host alpha-oriented investment managers and institutional grade investors that are introduced to each other with a view to become investment partners.

This Catalyst Cap Intro Event focuses only on the L/S Equity | Event Driven Investing space. Strategies covered include, among others: fundamental research, global equity, merger arbitrage, small/micro caps, regional/international, industry specific, trend/ signals, as well as event driven funds based on behavior, public reports, litigation, adverse news, structural change, insider filings, and more.

ACCESS FREE CONFERENCE SLIDE DECKS AND PRESENTATIONS

Preqin attends and speaks at many different alternative assets conferences throughout the year, covering topics from infrastructure fundraising trends to alternative UCITS.

All of the conference presentations given by Preqin speakers, which feature charts and league tables from Preqin’s online products, can be viewed and downloaded from Preqin’s Research Center Premium, for free.

For more information, and to register for Preqin’s Research Center Premium, please visit: www.preqin.com/rcp