Biggest hedge funds continue to expand, reveals Hedge Fund Intelligence report

InvestorsLaunchesPeople Moves
16 Apr, 2012

The 340 hedge funds managing north of $1 billion continued to grow and now collectively hold 86% of the industry’s $2 trillion total Assets under Management (AuM), according to data providers Hedge Fund Intelligence.

This represents a marginal increase from 84% in 2011, and 82% in 2010. The lion’s share of these assets is also held by the “super-league” of $5 billion plus managers. Currently, 99 managers fit into this bracket, up from 93 last year. These “super-league” hedge funds manage $1.23 trillion AuM, an increase from $1.15 trillion in 2011, and account for almost 60% of the industry total AuM.

It remains a challenging market for sub-$1 billion managers. Last summer Citi Prime Finance estimated just one manager in eight controlled the vast majority of the $2 trillion or so that is invested in hedge funds. According to Hedge Fund Research, nearly three quarters of net capital inflows in 2011 went to funds with more than $5 billion in AuM.  A survey of institutional clients by J.P. Morgan found two out of five investors writing tickets of at least $250 million will not even consider a manager that is below $1 billion in AuM.

The US market remains the biggest hedge fund centre with 230 firms managing more than $1 billion based there. Of those, 139 are located in New York, an increase from 128 in 2011. However, the proportion of assets held by these companies fell from 44.96% to 42.61%.

London remains the second largest hedge fund jurisdiction with 57 managers with $1 billion dollar plus AuM, down from 63 - although these firms are managing a marginally bigger share of the assets (14.55% in 2012 Vs 14.49% in 2011).

The exodus of hedge funds to Asia has clearly not materialised. There are just 13 hedge funds managing more than a billion dollars in Hong Kong (up from 11 in 2011) while Singapore has eight (up from seven in 2011). Some managers have realised Asian regulatory regimes are not as lax as once believed. Hong Kong’s SFC has been compared to the UK’S FSA, while Singapore is tightening up its rules. Furthermore, many hedge funds are discovering investor appetite remains lacklustre in these regions.