View the full edition of Spotlight at: https://www.preqin.com/docs/newsletters/hf/Preqin-Hedge-Fund-Spotlight-May-2016.pdf ê Feature Article The $1bn Club: Largest Hedge Fund Managers Download Data

The $1bn Club: Largest Hedge Fund Managers

This month, Janet Chambers takes a look at the ‘$1bn Club’, a group of the world’s largest hedge fund managers. In the 12 months since Preqin’s last $1bn Club report, there have been significant changes to the make-up of the group, not least the 170 hedge fund managers entering the club.

Following an underwhelming 2015 managers that have experienced a Inside the $1bn Club and a slow start to 2016 in terms of steady growth in AUM. This article looks performance, hedge fund managers at the current make-up of the $1bn Club Managers with $20bn or more in AUM have experienced two consecutive and how it has changed over the past have seen their assets decline by 15% quarters of net outfl ows to Q1 2016 year. since May 2015, implying that even (see page 6). However, one group of the elite have not been immune to managers that continues to dominate Preqin’s Hedge Fund Online currently redemptions from institutional investors the assets of the hedge fund industry is details 668 managers with at least $1bn over the past 12 months. Bridgewater the $1bn Club – hedge fund managers in AUM, with the club increasing by Associates maintains its position as the with at least $1bn in assets under a net 98 members over the past year. largest hedge fund manager in the world management (AUM). Established The $1bn Club accounts for 12% of all (Fig. 1); however, the AUM of Bridgewater members of the club draw attention from hedge fund managers, yet represents Associates has fallen to $146bn as of institutional investors, with $1bn Club 88% of hedge fund industry assets. February 2016 – a decline of $23bn managers experiencing strong success However, despite the increasing number from Q1 2015. Two systematic fi rms in raising capital. 2016 has seen new of managers joining the $1bn Club, the focused on statistical and mathematical entrants to the $1bn Club, including proportion of industry assets these fi rms modelling have entered the top 10 in newer hedge fund managers that have represent has declined from 92% in 2016, Renaissance Technologies and shown strong credentials at previous 2015. Two Sigma Investments. fi rms, as well as more established

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

Manager Headquarters Assets under Management Bridgewater Associates US $146.3bn (As at 29 February 2016) AQR Capital Management US $74.0bn (As at 30 September 2015) Man Group UK $53.1bn (As at 31 March 2016) Och-Ziff Capital Management US $42.0bn (As at 1 April 2016) Standard Life Investments UK $38.4bn (As at 31 December 2015) Winton Capital Management Ltd. UK $34.5bn (As at 31 March 2016) Millennium Management US $33.0bn (As at 1 March 2016) Renaissance Technologies US $32.3bn (As at 31 March 2016) BlackRock Alternative Investors US $31.0bn (As at 31 December 2015) Two Sigma Investments US $31.0bn (As at 31 December 2015)

Source: Preqin Hedge Fund Online

Fig. 2: Distribution of Assets under Management within the $1bn Club Fig. 3: $1bn Club Managers by Strategy Employed

900 $845bn 30% 100% 1% 1% 2% 1% Niche Strategies 27% 10% 13% 800 90% 14% 20% 25% 5% Multi-Strategy $675bn $672bn 6% 4% 700 80% 11% 12% 12% 7% 600 $559bn 22% 21% 20% 70% Managed 14% 15% Futures/CTAs 485 60% 15% 500 18% 15% Relative Value 15% 400 50% 13% 11% Strategies 13% 16% Credit Strategies 300 10% 40% 9% 11% 11% 30% 11% Event Driven 200 13% 99 5% Strategies 100 61 20% 23 of Managers Proportion 37% Macro Strategies 28% 26% 0 0% 10% 21% $1-4.9bn $5-9.9bn $10-19.9bn $20bn or More 0% Equity Strategies Assets under Management $1-4.9bn $5-9.9bn $10-19.9bn $20bn or No. of Firms Aggregate AUM of Firms ($bn) More Proportion of Industry Assets Assets under Management Source: Preqin Hedge Fund Online Source: Preqin Hedge Fund Online

3 Hedge Fund Spotlight / May 2016 © 2016 Preqin Ltd. / www.preqin.com View the full edition of Spotlight at: https://www.preqin.com/docs/newsletters/hf/Preqin-Hedge-Fund-Spotlight-May-2016.pdf ê Feature Article The $1bn Club: Largest Hedge Fund Managers Download Data

As seen in Fig. 2, the largest proportion at least $20bn in AUM employing the $1bn Club are also increasingly using (27%) of industry assets are attributed strategy. As these funds trade in multiple alternative structures to launch new to managers with total AUM of $1-4.9bn. markets they are able to accumulate funds: UCITS structures accounted for Over the past year, aggregate AUM of greater AUM without compromising their 21% of all funds launched in 2015 by managers in the $10-19.9bn bracket overall strategy and returns potential. current $1bn Club managers, compared has surpassed that of managers with Other strategies often do not have the with 15% in 2014. Nearly half (48%) of $20bn or more in assets, standing at potential to scale to such large sizes. the UCITS funds launched by current $675bn and $672bn respectively. In contrast, we see a more focused $1bn Club managers in 2015 were by investment approach from the smallest North America-based fi rms, compared Structures and Strategies of $1bn managers, with only 10% employing a with 26% in 2014, which shows that Club Managers core multi-strategy approach. North America-based managers see the potential in the European UCITS CTAs started 2016 strongly with the Larger AUM provides scope to launch wrapper (Fig. 5). Preqin All-Strategies CTA benchmark more hedge funds; as shown in Fig. showing positive Q1 returns and 4, 13% of the largest hedge fund Location of $1bn Club outperforming the Preqin All-Strategies managers offer 10 or more core hedge Hedge Fund benchmark in January fund strategies to institutional investors. North America-based hedge fund and February. However, managed Conversely, managers with fewer managers dominate the $1bn Club: 72% futures/CTAs account for only a small resources in the $1bn Club typically offer of the largest hedge fund managers proportion (5%) of the strategies offered lower numbers of hedge fund strategies, globally hail from the region, up fi ve by the $1bn Club, with these funds with just over half (51%) of hedge fund percentage points from 2015. Currently, most prevalent among managers in the managers with $1-4.9bn in AUM offering North America is home to 479 $1bn Club $20bn+ bracket (7%), as shown in Fig. just one hedge fund strategy. managers, which hold just over $2tn in 3. total AUM, followed by Europe with 129 Hedge funds offered by the $1bn Club $1bn Club managers managing $605bn. Multi-strategy funds are most common most widely use a commingled fund Asia-Pacifi c (51) and Rest of World (9) among the largest managers in the structure; three-quarters of $1bn Club make-up the remainder of the $1bn $1bn Club, with 20% of managers with managers offer this type of fund. The Club, with managers located in these

Fig. 4: $1bn Club Managers by Number of Core Fig. 5: UCITS Launches by the 2016 $1bn Club by Fund Strategies Offered Manager Location, 2014 vs. 2015

100% 3% 100% 6% 3% 7% 8% 13% 90% 11% 90% 18% 11% 10+ 80% 17% 80% 70% 26% 17% 6-9 70% 44% 27% 9% Asia-Pacific 60% 74% 4-5 60% 50% 16% 22% Europe 26% 3 50% 40% North 18% 40% 30% 13% 2 America 51% Proportion of Managers Proportion 30% 20% 1 33% 48% 26% of Fund Launches Proportion 20% 10% 25% 26% 10% 0% $1-4.9bn $5-9.9bn $10-19.9bn $20bn or More 0% Assets under Management 2014 2015 Source: Preqin Hedge Fund Online Source: Preqin Hedge Fund Online Fig. 6: Top 12 Locations of $1bn Club Managers

Location No. of Hedge Fund Managers Total AUM ($bn) New York 236 985.6 London 82 389.6 Connecticut 42 313.2 Massachusetts 37 194.4 California 49 181.8 Illinois 25 99.9 New Jersey 15 45.1 Texas 14 44.4 Hong Kong 28 43.5 Paris 9 35.3 Minnesota 8 27.6 Singapore 7 21.4

Source: Preqin Hedge Fund Online

4 Hedge Fund Spotlight / May 2016 © 2016 Preqin Ltd. / www.preqin.com View the full edition of Spotlight at: https://www.preqin.com/docs/newsletters/hf/Preqin-Hedge-Fund-Spotlight-May-2016.pdf ê Feature Article The $1bn Club: Largest Hedge Fund Managers Download Data

regions managing an aggregate $102bn (10%) and Asia-Pacifi c-based (6%) Outlook and $21bn respectively. managers represent signifi cantly smaller proportions. Forty-two percent of new With the number of managers exceeding New York remains the headquarters of entrants to the smallest bracket utilize $1bn in AUM increasing, the $1bn choice for the $1bn Club; 236 managers equity strategies, compared to 46% of Club continues to control a substantial are currently based in the state (Fig. 6), members that have dropped out of the portion of the hedge fund industry’s an increase of 34 managers from 2015. club; event driven, credit and relative assets. Some new managers with an However, the AUM of these managers value strategies are employed more by existing attractive pedigree have been has decreased to $986bn in 2016 new entrants than dropouts (Fig. 8). able to obtain large capital commitments from just over $1tn in 2015. As seen in from day one, while more established Preqin’s recent factsheet, Connecticut is Five fi rms established in 2015 have fi rms have entered the club through home to some of the largest hedge fund already amassed assets of $1bn or more. asset growth. The differences between managers in the world and is the second Three of the $1bn Club fi rms established the largest and smallest $1bn Club largest US state in terms of hedge fund in 2015 are spin-offs: Verde Asset managers are still evident in 2016, with AUM ($313bn). Furthermore, 98% of all Management, Systematica Investments the largest managers able to offer more Connecticut-based hedge fund AUM is and Garda Capital Partners. In early strategies to institutional investors, managed by 42 $1bn Club managers. 2015, BlueCrest Capital decided to spin leading the $1bn Club in CTA, macro Representing Europe, London is the out its systematic hedge fund business and multi-strategy offerings. North second most common headquarters to launch Systematica Investments with America continues to be the hub of the of the $1bn Club; 82 managers are $8.5bn, pushing BlueCrest out of the $1bn Club with New York as its beacon headquartered in London, managing $20bn or more AUM bracket, before and London leading the way for those $390bn in total assets. New entrants in its conversion to a family offi ce. Verde outside North America. this year’s top 12 locations are Paris and Asset Management spun off Credit Minnesota, with São Paulo and Florida Suisse Hedging-Griffo and Garda So far in 2016, we have seen some big- dropping out from 2015. Capital Partners is a spinout of Black name hedge fund investors handing in River Asset Management’s relative redemption notices including NYCERS New Entrants and Dropouts in the value strategies hedge fund arm. The and MetLife; despite these large $1-4.9bn Bracket two remaining $1bn Club entrants institutional investors withdrawing established in 2015 are from two well- capital commitments from $1bn Club All the $1bn Club members that appeared known hedge fund fi rms. Scott Bessent managers, the largest hedge funds have in Preqin’s 2015 $1bn Club report but launched Key Square Group following still seen net infl ows over Q1 2016 (see not in this current edition have dropped his time as George Soros’ right-hand page 7). Relying on their experience out of the $1-4.9bn bracket. Similarly, man, and former Eton Park Capital and ability to produce risk-adjusted the vast majority of new entrants to the Management partner Isaac Corre returns under all market conditions to $1bn Club in 2016 manage $1-4.9bn in launched Governors Lane in Q2 2015. distinguish themselves from the rest of AUM. As shown in Fig. 7, North America the industry, the $1bn Club will look to represents 84% of all new entrants to maintain and build on its leading position the $1-4.9bn bracket, while Europe- within the hedge fund industry.

Fig. 7: $1-4.9bn Managers: New Entrants vs. Dropouts by Fig. 8: $1-4.9bn Managers: New Entrants vs. Dropouts by Manager Location Top-Level Strategy

90% 50% 84% 46% 45% 42% 80% 40% 35% 70% New Entrants 30% 60% 25% 52% New Entrants 20% Dropouts 50% 16% 15% 13% 11% 11% 11% Dropouts 10% 9% 40% 10% 7% 7% 7% 6% 4% Proportion of Managers Proportion 5% 2% 30% 24% 0% 0%

Proportion of Managers Proportion 20% 13% 10% 11% 10% 6% 0% Strategies Managed

0% Strategies Event Driven Event Futures/CTAs Multi-Strategy

North Europe Asia-Pacific Rest of RelativeValue Niche Niche Strategies Equity Equity Strategies CreditStrategies America World StrategiesMacro Manager Location Top-Level Strategy Source: Preqin Hedge Fund Online Source: Preqin Hedge Fund Online

5 Hedge Fund Spotlight / May 2016 © 2016 Preqin Ltd. / www.preqin.com