Europe 50 (2007)

Produced in association with Fimat

PHILIPPE TEILHARD

Welcome to the Second Edition of the Europe50. It is with great pleasure that we continue to support this ranking of the leading hedge fund groups – by assets under management – in Europe. It serves as a valuable snapshot of the growth in prosperity and importance of the leading hedge fund firms.

While there have been big changes for a handful of the firms on this list, and some new arrivals, it has been business as usual for most of the constituents. Indeed, business looks to have been good, with the total sums involved increasing substantially since our last survey in June 2006.

Many large European hedge fund firms have been able to increase their assets under management over Q3 and Q4, and where they have lost ground in our 2006 ranking, it is only because others have been getting bigger, faster. A decrease in assets, even a small one, is enough to push firms well down in the rankings, probably disproportionately to their overall performance. This is probably a little unjust, but at the same time is a mark of the overall success of the top players in the business in the second half of 2006.

Overall, it paints an optimistic picture for those established multi-manager firms that are now dominating the European hedge fund landscape. We are seeing some mature, robust fund management groups emerging with significant assets under management (the top 10 all have funds under management in excess of $10bn), running multiple funds and strategies, and with an increasing number of institutional clients. These same investors, including the big funds of funds houses, are choosing firms with established track records, plenty of liquidity, solid operational infrastructure and a strong research pipeline.

In some respects, these hedge fund firms are becoming established, institutional brands in their own right, a far cry from the small, boutique-scale operations that they started out as. However, it is also noticeable that there is an increasing number of true blue institutional hedge fund operations in these rankings, part of the response by mainstream asset management houses to the increased popularity of hedge funds. Apart from Man Investments, which has enjoyed massive success in this market, names like Barclays, Citigroup, Gartmore, HSBC, Henderson, Old Mutual, Barep, Threadneedle, ADI and New Star, illustrate how major fund managers and banks have been able to build effective and competitive hedge fund operations within the existing operational and risk management superstructure of their existing businesses. This is proving to be an attractive formula for institutional clients.

It is not simply superior performance that is contributing to the growth in assets amongst the leading firms. It is a demonstrated ability to launch brand new strategies and recruit new talent that has helped some to increase their asset base. The diversification of the sources of returns operated by top firms such as Winton Capital – with its Evolution Fund – and Bluecrest confirms this as a key driver for growth. In addition, listed investment funds and managed account arrangements have helped to radically boost assets.

It is a good time to be running a growing hedge fund operation in Europe. There is now increased interest in European markets from groups in the US seeking new opportunities, and a greater appreciation of the diversification opportunities that hedge funds provide to institutional investors. Regulatory changes in France, Spain, and Germany have held out the possibility of more allocations to hedge funds in the future, and the strong growth of managed accounts platforms and listed hedge fund vehicles are also evidence of that institutional appetite for non-correlated investments.

Movers and shakers

Regarding the new ranking, the most notable move is the continued rise of Barclays Global Investors, now in the number one position in the Europe50, replacing Man Investments, which drops to third. GLG managed to weather its regulatory problems, even climbing a place to the silver medal spot, with a very respectable $17.9bn in assets under management at the end of last year.

Chris Hohn and The Children's Investment Fund Management have been making headlines recently with their activist investment stance, but they have also been pleasing their investors. Although exact figures were not made available to us for this survey, the firm's estimated numbers put it at $11.7bn, a massive increase from the $6.5bn that it was running in November 2005.

An important trend in Europe is the continued rise of quant and statistical-based strategies. Capital Fund Management and Winton Capital Management saw their assets under management jump an impressive 70% and 46% – to $2.99bn and $7.41bn respectively from our last survey – and are being rewarded for their ability to develop and maintain an ambitious research pipeline.

We have admitted additional assets from Citigroup and HSBC which have somewhat distorted their rise in the rankings, but which we (and they) feel more accurately reflect their relative position. In the case of Citigroup Alternative Investments, we have now included the assets of two subsidiary hedge funds that Citigroup operates in Europe, which, along with Tribeca, lifts its assets under management to $8.32bn, and takes it well within the top 20. For HSBC, we have now included Sinopia and Halbis Partners under a single entry, hence its remarkable rise up the listings, from 47th to 9th place. Both groups are becoming increasingly dominant players in this space, thanks to their scale as banking and asset management organisations, and their respected institutional brands.

Apart from the two cases above, the biggest upward movers in terms of rankings were William von Mueffling's Cantillon Capital Management, which climbed seven spots to 15th, with just over $8bn in assets under management, and London Diversified Fund Management, which also climbed seven places, from 34th to 27th. Indeed, London Diversified has managed to more than double its asset base between June 2005 and December 2006, an impressive achievement.

New entries to the rankings include Cevian Capital, the Swedish activist hedge fund managed by Christer Gardell and Lars Forberg, and Ecofin, the UK-based operation specialising in the global utilities sector. Congratulations to both firms on their recent success. We shall be watching their progress with interest.

Methodology

The Europe50 is essentially a listing of the top 50 single manager hedge fund businesses in Europe, arranged according to total assets under management at end December 2006. Where possible The Hedge Fund Journal has also included the top five funds in the business, the strategies they deploy and the names of the portfolio managers. AUM figures have been provided for November 2005 and May 2006, in addition to the December 2006 figure.

As ever, The Hedge Fund Journal is only counting hedge fund assets managed or advised by the respective firms, not long-only funds. In addition, only assets managed geographically out of Europe – whether the underlying securities be listed in Europe or not – are taken into consideration. Thus, some large global hedge fund firms with only a limited degree of portfolio management activity in Europe, have not made the list.

Where possible, The Hedge Fund Journal has sought to source data directly from the managers, and thanks are due to all those individuals and firms that have helped with this survey. In other instances, where information was harder to come by, researchers consulted third party sources in order to provide an estimate of the funds under management, and again, thanks are due for their invaluable help.

There have been a couple of exceptions to this: both Centaurus Capital and Toscafund remain very tight-lipped about their asset figures, and it is difficult to make an estimate that the magazine would be comfortable with, but there is every likelihood that they would otherwise be included in these rankings.

Some firms have not been able to provide a December 06 figure, and in such cases The Hedge Fund Journal has provided the most recent figure available (Man Investments being a prominent example). In cases where there is an additional multi-manager or platform-based product in-house, we have tried to only count assets invested with funds being managed by the firm's own portfolio managers, not funds allocated to third party external managers.

Managers who feel that their firms should have made the grade, or would like to be considered for inclusion in future Europe50 rankings, are encouraged to contact The Hedge Fund Journal directly.

To download the full ranking list, please click here