The inaugural 2010 ‘Tomorrow’s Titans’ report was the first piece of work I did for The Hedge Fund Journal. It became a biennial fixture, with subsequent reports published in 2012, 2014 and 2016, all supported by EY. Each report has featured managers who went on to show spectacular asset growth and performance. We therefore thought it opportune to revisit the 180 managers featured in the four reports published so far and highlight forty or so who have done particularly well both in terms of asset growth and performance. We have listed these managers and written a small piece about each. Over the course of the next few months we will run extended profiles on several of these managers. We kick things off in this issue with an extended profile of Kairos’ Federico Riggio.
The Tomorrow’s Titans – primarily managers who have spun out of large hedge funds to set up their own firms – are rather different from the rest of the industry. If UCITS and liquid alternatives have been important sources of asset growth in general, the great majority of Titans do not run these vehicles.
The Titans illustrate the diversity of the hedge fund industry. In equities, some mainly trade mega-caps or large caps while others focus on mid-caps or small caps. Some are long-biased, while others are market neutral. Notably in the event driven space, some of the most successful funds are run with low market correlation. Even within strategies that have, on average, not been the best performers post-crisis – such as discretionary macro, discretionary commodities, and long volatility – there are winners who have performed well and raised a billion or more.
Of course, some new launches have returned capital to external investors, and shut down. But some of those Titans have gone on to obtain senior roles in large hedge funds, become family offices, or moved onto their second launch.
2017 seems an ideal time to update ourselves on the Titans’ progress as it is shaping up to be a vintage year for hedge funds, with high single digit performance heading for the best year since 2013. Asian equity-oriented strategies are leading the way, with some exceptional numbers from quantitative strategies. Non-directional strategies, including convertible arbitrage and relative value credit, are also profiting, partly from greater dispersion. Managed futures and CTAs is a broad church, but trend-followers are starting to perform as they latch onto moves such as the recovery in oil prices.
Performance is a key reason why we must not lose sight of newer and smaller funds. According to Eurekahedge, funds running less than $250 million are up 8.32% in 2017 to November; those running between $250 million and $1 billion are up 6.54% and those managing over $1 billion are up 5.04%. (The size versus performance relationship does vary by strategy however).
Our only regret about the Tomorrow's Titans reports is that we do not find more women for them. However, many women portfolio managers in the sibling ‘50 Leading Women in Hedge Funds’ reports, should be seen as worthy Titans. We are grateful to EY for their generous sponsorship of both reports.