Europe 50 (2010)

Europe’s largest single managers ranked by AUM

Originally published in the September 2010 issue

Welcome to the fifth annual snapshot of the top 50 European hedge fund managers ranked by single manager assets under management at the mid-way point of 2010. It is our belief that sourcing and publishing data about hedge funds serves an important function for investors and the asset management industry generally. The willingness of hedge fund managers to disclose such basic data has grown as investors have demanded more transparency. Indeed, The Hedge Fund Journal got unprecedented cooperation from firms across Europe in compiling the 2010 survey.

The year began positively for hedge funds with a continued broad recovery in risk asset prices from the downturn that began in mid-2008 and ran through early 2009. This provided a breather for many hedge fund firms to rebuild assets, restructure operating costs and refine approaches to portfolio and risk management. The abrupt reversal in risk asset prices since May has cost most hedge funds performance gains, assets and operating profits. Yet the total assets under management for Europe50 firms still rose 11% to $300 billion from $271 billion in our 2009 survey, although this figure is well short of the $366 billion recorded in early 2008.

The survey’s aggregate figures evidence a gradual recovery. Yet they also hide an essential truth: the very biggest firms are drawing in new assets while smaller firms are struggling to retain assets. Thus Brevan Howard, which claimed the top spot for the first time in 2009 consolidated its number one status with an impressive 23% rise in AUM to $31.54 billion. Man Investments, despite a 4% slip in AUM, retained its 2nd place rating with assets of $24.3 billion while it continued to await regulatory approval for its proposed acquisition of GLG Partners, down to 7th from 4th with AUM of $12.1 billion. Among the largest hedge fund shops, the kudos for the biggest growth in assets goes to BlueCrest Capital Management where AUM leapt 58% to $20.5 billion. One simple calculation illustrates clearly how the biggest firms are pulling away from their smaller peers. The top five firms had mid-2010 aggregate AUM of $112 billion, a rise of almost 18% from the same aggregate figure in early 2009. However, the capital held by the 10 smallest firms in the survey, beginning with newcomer Tyrus Capital in 41st, declined to $14 billion from $15 billion in early 2009. Much anecdotal evidence suggests that the flight to size is having an even more pronounced impact on the hundreds of smaller firms that fall below the threshold for inclusion in the Europe50. What’s more, the tough environment for capital raising and the cost of regulatory changes is likely to crimp the emergence of new funds for some years to come.

The liquidity, perceived brand value and high levels of infrastructure associated with the biggest hedge fund managers continue to attract investors. This has seen a flight of capital from the smallest firms, something that is shown by the decline in assets among the lower ranks in the Europe50. In 2008, for example, Adelphi Capital needed almost $2.3 billion to be in the 50th slot. A year later the amount Centaurus Capital needed for the final position fell to $1.5 billion. This year the final ranking belongs to RAB Capital with AUM of $1.08 billion. As firms have lost assets the years of expansion have given way to a prolonged period of downsizing. This trend has reached even the biggest firms as both Brevan Howard and Man Investments restructured costs last year. Though the hedge fund industry looks to have stabilised in 2010, most firms are refraining from expanding into new areas or adding staff.  

Yet even in a tough environment for start-up hedge funds a number of new entrants to the Europe50 show that innovation is alive. After being Europe’s biggest launch in 2009, Tony Chedraoui’s event driven vehicle Tyrus Capital may be just getting warmed up with assets of $1.64 billion. It is a sign of the times that emerging market specialist Finisterre Capital joins the Europe50, entering at 48th with an expansion in AUM to $1.2 billion. Two other firms, GLC and Altis Partners, join the Europe50 although neither firm is a recent launch. Indeed, GLC, a systematic trader, dates from 1992, but it has nearly doubled AUM to $1.59 billion since the beginning of 2009. Now based in Jersey, Altis Partners is in its ninth year of systematic managed futures trading and after a stellar 2008 has grown AUM to $1.4 billion. Several firms were close to the threshold but declined to verify data, notably special situations and distressed debt fund operator Fortelus Capital Management founded in 2007 by Tim Babich.

Mention has been made of Brevan Howard and BlueCrest Capital making substantial gainsin AUM. However, the two biggest gainers in the survey are both newcomers. Pharo Management debuts in 27th position after it virtually trebled AUM to $3.2 billion on the back of the phenomenal performance of the Pharo Macro fund which applies macro strategies in emerging markets. An even more spectacular debut is that of COMAC Capital run by the former Soros global macro manager Colm O’Shea. Founded just over four years ago, COMAC enters the Europe50 at 16th with AUM of $5.5 billion.

The progress of several firms up the ranking table also deserves comment. Swedish firm Brummer & Partners vaulted into the top 10 in 9th position as its diverse funds offering (spanning managed futures, fixed income, macro and equities) nearly doubled AUM to $8.64 billion. Paris-based Dexia Asset Management advanced to 13th position by more than doubling AUM to $6.68 billion helped by growth in several product lines, including UCITS funds. Geneva-based Jabre Capital Partners entered the top 20 with assets rising to $5.2 billion as it, too, succeeded in attracting investors to both its offshore and growing stable of UCITS funds. Finally long/short equities firm TT International in London moved up 10 positions to 35th as it boosted AUM by 39% to $2.1 billion.

As with previous Europe50 lists, we have focused on those firms which can be recognised as distinctly European businesses, usually those where the executive functions and head office are located in Europe. In some cases, the European subsidiaries of larger, global asset management operations can still qualify on the strength of the money being managed out of their European offices. The key criterion in these latter instances is where the assets are being managed from, not where they are located.

Where the executive function is located in Europe, we have, for the sake of convenience, included all the assets managed by that group, regardless of where the portfolio manager is sitting. Where the executive function is outside Europe, it has just counted the assets managed by European-based portfolio management teams. In cases where groups manage both hedge fund and non-hedge assets, we have stripped out the non-hedge component of the asset base. In two cases – The Children’s Investment Fund Management and Trafalgar Asset Managers – we have provided an estimate of the money being managed. In these cases, we canvassed a number of data sources to compile the estimates.  

The Hedge Fund Journal would like to thank the Newedge Prime Brokerage Group for continuing to sponsor the Europe50. We also congratulate all those firms in the survey and give a special welcome to new entrants. We look forward to seeing mangers of all sizes, including those below the threshold, make their mark in the coming years. Certainly the tough conditions that envelop markets offer a ready testing ground for Europe’s leading asset managers to show their skill. We think the results will bear watching.

The full list can be downloaded by clicking here