Largest Hedge Fund Managers Download Data

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The $1bn Club Largest Hedge Fund Managers Download Data

The $1bn Club: Largest Hedge Fund Managers

In this month’s feature article, Joseph McGee takes a look at the ‘$1bn Club’, a group of the world’s largest hedge fund managers, and identifies the traits and characteristics that are unique to this distinguished group which controls a vast proportion of industry capital.

Fig. 1: Top 10 Hedge Fund Managers by Assets under Management

Firm Firm Location Total AUM ($bn) AUM Date Bridgewater Associates US 169.5 31 March 2015 AQR Capital Management US 64.9 31 December 2014 Man Investments UK 50.0 31 March 2015 Och-Ziff Capital Management US 47.2 1 May 2015 Standard Life Investments UK 35.3 31 December 2014 BlackRock Alternative Investors US 31.8 31 December 2014 Winton Capital Management UK 31.1 31 March 2015 Viking Global Investors US 30.3 31 December 2014 Millennium Management US 29.2 1 May 2015 Lone Pine Capital US 29.0 31 December 2014

Source: Preqin Hedge Fund Analyst

Over the past year, hedge fund industry assets have increased, as BlueCrest Capital which fell out of the $20bn+ bracket, partly due surpassing the $3tn mark as of December 2014. One notable to spinning out its BlueTrend funds as Systematica Investments in group active in this space is managers with at least $1bn in assets January 2015. under management (AUM) – the ‘$1bn Club’ – comprised of some of the largest hedge fund managers in the world. Being in the Club In order to get a more complete picture of the $1bn Club, it is captures the attention of many institutional investors, but is no necessary to look closer at its overall composition, both in terms easy feat; many have steadily grown their assets over many years, of membership and strategies. Fig. 2 shows how assets are withstanding both turbulent and stagnant periods and delivering distributed between the larger and smaller members of the $1bn returns to investors. New entrants to the Club have demonstrated Club. The vast majority of members manage between $1bn and superior performance to accumulate their assets or have shown $4.9bn, while on the larger end of the scale, 22 fi rms manage credentials from previous fi rms to attract large amounts of capital. over $20bn in hedge fund assets. Aggregate capital is heavily distributed at each end of the scale: fi rms in the $1-4.9bn category Preqin’s Hedge Fund Analyst shows that there are currently over have $892bn in aggregate assets under management (28% of the 570 managers worldwide with at least $1bn in hedge fund AUM, an industry) and fi rms managing over $20bn have $790bn (25%). The increase of 63 managers from last year, representing a signifi cant proportion (92%) of total industry capital. Here, we take a look at the Fig. 2: Assets under Management Distribution Within the $1bn Club $1bn Club of hedge fund managers and identify the characteristics and attributes of what it takes to reach, and remain at, the top of 1,000 28% 30% the hedge fund industry. 900 25% $892bn 25% 800 The Composition of the $1bn Club $790bn 700 20% 19% 20% The recent growth in industry assets has been particularly 600 $631bn $593bn noticeable among the largest hedge fund managers. Fig. 1 shows 500 15% the 10 largest fi rms by AUM. Within this group, several members 400 418 have experienced signifi cant changes in AUM over the past 12 10% 300 months. Bridgewater Associates is currently the largest hedge fund 200 manager globally and increased its assets from over $154bn in 5% March 2014 to almost $170bn in March 2015. Among other leading 100 89 42 22 managers, the biggest mover was Man Investments, where a 0 0% number of major acquisitions such as Numeric Investors (in June $1-4.9bn $5-9.9bn $10-19.9bn $20bn or More 2014) and NewSmith (February 2015) boosted the fi rm’s hedge Assets under Management fund assets from just over $28bn in March 2014 to $50bn in March No. of Firms Aggregate AUM of Firms Proportion of Industry Assets 2015. Not all managers have seen assets increase however, such Source: Preqin Hedge Fund Analyst

The $1bn Club Largest Hedge Fund Managers Download Data

Fig. 3: Breakdown of Strategies Used by Hedge Funds Fig. 4: Breakdown of Number of Core Strategies Offered by Managed by $1bn Club Managers $1bn Club Managers

100% 1% 3% 1% 1% 100% 3%1% 2% 8% 11% Niche Strategies 7% 9% 9% 90% 10% 90% 17% 8% 24% 11% 13% 14% 80% 14% Multi-Strategy 80% 14% 10 or More 11% 24% 70% 70% 18% 12% 19% 14% Relative Value 6-9 16% 25% 19% 60% Strategies 60% 7% 5% 4-5 15% 50% Credit Strategies 50% 14% 21% 9% 19% 22% 3 40% 40% 27% 14% 18% Event Driven 7% 2 30% Strategies 30% 19% 51% Macro Strategies 1 20% 41% 20% Proportion of Hedge Funds 34% 32% 30% 27% 27% 10% Equity Strategies 10% 21% Proportion of Hedge Fund Managers 0% 0% $1-4.9bn $5-9.9bn $10-19.9bn $20bn or $1-4.9bn $5-9.9bn $10-19.9bn $20bn or More More Assets under Management Assets under Management Source: Preqin Hedge Fund Analyst Source: Preqin Hedge Fund Analyst median assets under management for a $1bn Club fi rm is $2.4bn, Previous Experience and Age Help to Break into $1bn Club refl ecting the heavy concentration of fi rms in the $1-4.9bn segment. A number of new fi rms launched over the past year have reached Strategy Preferences of the $1bn Club $1bn or more in assets. 2014 saw the likes of Darsana Capital Partners, Finepoint Capital, Hitchwood Capital Management, There are also signifi cant differences within the $1bn Club between Shellback Capital, Three Bays Capital, Thunderbird Partners and the larger and smaller fund managers in terms of the range and Two Creeks Capital Management all launch debut funds that have number of strategies they employ. Smaller managers in the Club grown to over $1bn in AUM. A number of fi rms are reported to be are more likely to offer equity strategies (as shown in Fig. 3) than targeting a similar result in 2015, including former Brevan Howard all other AUM segments. This may refl ect the diffi culties in scaling partner Chris Rokos’s Rokos Capital Management and former Eton core equity strategies funds without affecting performance. Park Capital Management partner Isaac Corre’s Governors Lane. A common feature of all of these new launches is that the founders Macro strategies and multi-strategy hedge funds are more were all senior employees at other $1bn Club hedge fund fi rms, common among the offerings of the largest fund managers. suggesting the importance that investors attach to a background at Eighteen percent of funds offered by managers with over $20bn in a leading fi rm. In some cases, such as ex-Ziff Brothers employee AUM employ macro strategies. Multi-strategy funds have become David Fear’s Thunderbird Partners, the managers were able more prominent among fi rms with over $20bn, rising to 24% of to attract the backing of their former employers, which can help funds from 20% last year. This in part can be explained by investor accelerate the growth of assets in a fi rm’s early stages. interest in the strategy’s recent performance: in the 12 months to April 2015, the Preqin Multi-Strategy benchmark gained 8.47%, The two largest recent launches were both spinouts from other compared with 7.20% for all hedge funds. $1bn Club fi rms: Systematica Investments taking control of funds it had managed for BlueCrest Capital with $8.5bn in assets, and Furthermore, larger hedge fund managers tend to have the DW Partners leaving Brevan Howard Capital Management with infrastructure and internal resource to construct more complex $6bn. While spinning out allows fund managers to bring a track and multi-layered strategies. With the expertise and experience in record and some of their existing assets to the new fi rm, even the space, such managers can profi t from utilizing a multi-strategy these managers will likely require more time to become one of the approach that can provide further diversifi cation within a single- largest fi rms. As Fig. 5 shows, the largest fi rms are on average manager structure, offer more scope to generate absolute returns several years older than smaller fi rms in the $1bn Club. The series and refl ect the greater scalability of these funds. The model of of recent fund launches in the $1-4.9bn category means that the multi-strategy investing is followed by fi rms such as Millennium age difference between the largest and smallest fi rms is increasing. Management, where capital is allocated across a range of The mean year of establishment for fi rms with $1-4.9bn in assets separate trading teams with centralized risk controls, reducing the changed to 2001 from 1997 last year, refl ecting an increase in new reliance on a single strategy to produce consistent returns and also fund managers breaking into this category. By contrast, the mean reducing the risk of concentrated positions moving markets. year of establishment for fi rms with over $20bn in assets changed to 1992 from 1991 over the same period. Fig. 4 shows that the largest fund managers are more likely to offer a range of strategies to their investors, and this can play a key part New York and London Accommodate the Concentration of in providing managers with the consistency of performance that $1bn Club Managers allows them to grow their assets. Forty-one percent of managers with over $20bn in assets offered four or more strategies, compared Even as the overall membership and assets managed by the to only 11% of managers with $1-4.9bn in assets. By contrast, over $1bn Club have grown, there has been a notable concentration half of fund managers with $1-4.9bn in assets only offered a single of members in the two fi nancial centres of New York and London core strategy to their investors. (Fig. 6). New York in particular has seen the number of hedge fund

The $1bn Club Largest Hedge Fund Managers Download Data

Fig. 5: Mean Year of Establishment for $1bn Club Managers Outlook by Assets under Management The $1bn Club is a notable group of hedge fund managers with a Assets under Management Mean Year of Establishment set of unique and desirable characteristics that make them some $20bn or More 1992 of the most prominent managers in the industry today, and who will continue to attract the attention of investors in the space. $10-19.9bn 1995 Even within this group, however, there are signifi cant differences $5-9.9bn 1998 between the larger and smaller fund managers. The largest fund $1-4.9bn 2001 managers are more likely to offer a range of core strategies and Source: Preqin Hedge Fund Analyst show a preference for multi-strategy and macro strategy funds. All $1bn Club fi rms are concentrated in the main hedge fund centres managers with at least $1bn in assets increase from 174 to 202 of New York and London, with a large proportion hailing from North last year, while the combined assets managed by these fi rms has America as a whole. increased from $938bn to $1,052bn. The number of fi rms with at least $1bn in assets has also grown in London, from 80 last year to $1bn Club members are also likely to be older or at least able 83 at present, representing an increase from $346bn to $363bn in to clearly demonstrate a strong track record at a previous fi rm, aggregate AUM over the same period. showing their ability to navigate through various market cycles and periods in the effort to attract and retain investor capital, as was the Connecticut is home to 38 hedge fund fi rms in the $1bn Club, case for some new entrants. totalling $407bn in AUM, up from $400bn last year. The proximity of towns in this state, such as Greenwich and Westport, to the fi nancial hub of New York, combined with the state’s historically lower tax rates, has made this an attractive destination for hedge fund managers. The presence of several of the largest managers in Fig. 1, such as Bridgewater Associates ($170bn), AQR Capital ($65bn), Viking Global Investors ($30bn) and Lone Pine Capital Subscriber Quicklink ($29bn) help explain the high density of AUM in the state. Subscribers to Preqin’s Hedge Fund Analyst can click here The $1bn Club remains overwhelmingly concentrated in North to view a league table of the largest hedge fund managers in America, with 380 fund managers managing $2,136bn in this terms of assets under management. region. This is followed by Europe, which accommodates 130 fund managers in the $1bn Club and manages a total of $598bn. Fewer Filter investors in the league table by core strategy, fund types members are based in the Asia-Pacifi c (45) and Rest of World managed and manager location for more precise results. (16) regions, managing an aggregate $121bn and $51bn in assets respectively. Asia-Pacifi c also has the lowest average AUM per For more information, or to arrange a demonstration, please fund manager at $2.7bn, refl ecting the challenges of raising assets visit: even for the largest fund managers in this location. Members of the $1bn Club are spread over 31 countries worldwide, an increase www.preqin.com/hfa on 25 last year, showing the increasing dispersion of some of the largest fund managers in the world.

Fig. 6: Top 12 Locations for $1bn Club Managers

Manager Location No. of Hedge Fund Managers Total AUM ($bn) New York 202 1,052.1 London 83 363.3 Connecticut 38 407.1 California 35 178.7 Massachusetts 27 179.2 Hong Kong 22 56.2 Illinois 16 69.1 New Jersey 11 54.9 Texas 10 58.3 Singapore 7 18.7 Florida 7 24.1 São Paulo 6 28.1

Source: Preqin Hedge Fund Analyst