“Hedge fund in-flows hogged by the largest managers” is now a common cliché. But closer examination reveals that the composition of this cohort is not constant. Five managers in our 2012 Europe 50 failed to make our 2013 ranking, with one of them shutting down, and there were six new names this year. So only thirty-nine of the fifty appeared in both years’ surveys. Is there any other industry where less than 80% of the top fifty players stay the same from one year to the next? The hedge fund industry may be maturing but it remains uniquely dynamic.
On top of the five ejections, no less than sixteen of those in the 2012 survey experienced absolute declines in assets. In many cases, positive performance from these managers means that net outflows must have been even bigger than the drop in assets. In several cases it seems that managers of latterly unfashionable strategies – such as emerging markets, CTAs, and event-driven – have seen big outflows, even though many of them not only outperformed peers by a large margin but also provided strong absolute returns. It is a harsh climate when even the best managers in unpopular strategies see an exodus of assets.
Brevan Howard has grown assets by 9%, or $3.3 billion to $40 billion to take the top slot. Yet this is not the biggest increase, even in absolute terms. The prize for largest percentage increase in assets belongs to Marshall Wace, whose $4.1 billion jump in assets represented a 63% jump.
So, the big are collectively getting bigger, but membership of this group is fluid. Nobody can afford to be complacent and many managers have to sprint in performance terms just to stand still on assets. The growers have been imaginative in launching new strategies, acquiring other managers, hiring talent, and opening up new investment vehicles such as UCITS funds, '40 Act funds, and managed account platforms. There is also a trend towards offering more customised managed accounts, tailored to the tastes and whims of institutional investors.
Finally, we thank Newedge Alternative Investment Solutions for their continued sponsorship of this survey.
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