The Europe 50 (2011)

In association with Newedge Prime Brokerage

Originally published in the July/August 2011 issue

Welcome to the sixth edition of the top 50 European hedge fund managers (plus 10 additional firms, all of whom manage more than $1 billion) ranked by single manager assets at 30th June 2011. With global hedge fund assets over $2 trillion, we believe that sourcing and publishing data about hedge funds serves an important service to investors and the broader asset management industry. The willingness of hedge fund managers to disclose this basic information has grown as investors, increasingly dominated by pension funds and other institutions, have demanded greater transparency. The Hedge Fund Journal is indebted to firms across Europe for participating in our 2011 survey.

This year the survey provides more detail about the hedge funds managed by the Europe50 firms. We have gathered additional detail about each firm’s individual funds, the various portfolio managers, the strategies they follow and where a particular fund is domiciled. We have also included for the first time assets under management in UCITS funds. In accordance with the methodology of our UCITS Hedge database we only include funds where the prospectus permits managers to short individual securities.

The impact of more and more launches of UCITS funds is a matter of conjecture across the alternative investment industry. Fund managers that a year or two ago considered a UCITS product launch peripheral to their offshore fund strategies are now thinking again. This is generally in response to investor requests for such products owing to their liquidity and transparency. In many cases, these UCITS funds start off small, often with AUM of only $30-50 million. At the other end of the scale, several firms with many billions under management have launched UCITS funds with day one capital well over $100 million combining seed investment with new money from outside investors.

One knock facing UCITS funds is that performance is mediocre. While there is truth to this – our own UCITS Hedge Index is flat since its inception on 1st January 2010 – it is a phenomenon that is noticeable across many hedge fund strategies. For example, the HFRI Fund Weighted Composite Index gained just 0.77% during the first half of 2011 yet during the period Hedge Fund Research found that $62 billion in new capital came into the industry – the highest figure since the second half of 2007. The UCITS sector is too new to compare with that period but it is certainly the case that launch activity continues unabated, a trend that seems set to go on well into 2012.

A year ago, the timing of the survey followed a continued broad recovery in risk asset prices from the 2008-2009 downturn. Since the middle of 2010 hedge fund performance has largely marked time as many managers looked, above all, to safeguard assets through dampened risk exposure. In the main, managers have succeeded at this and served investors well. The proof of this is the fact that total assets under management for Europe50 firms rose a stunning 30% to $385 billion, up from $296 billion in our mid-year 2010 survey. This sets a new record for the Europe50, surpassing the AUM of $366 billion recorded in the early 2008 survey near the peak of the last bull market.

Thesurvey’s aggregate assets figure shows the rude health of the European hedge fund industry. It also shows the increasing impact of UCITS fund operators and other institutional money managers. Man Investments took pole position, with AUM of $34.1 billion, owing to consolidation after the group acquired GLG Partners in a $1.5 billion deal in late 2010.

Close behind in second spot is BlackRock, another acquisitive giant, whose single manager hedge fund and UCITS assets grew AUM to $34 billion. This left Brevan Howard, the 2009 and 2010 leader, in third spot with AUM of $32.1 billion following a year in which the macro maestro Alan Howard risk managed with customary élan but didn’t generate major gains for investors. Retaining fourth position is BlueCrest Capital, even though it grew AUM by 31% to $26.8 billion. Moving into fifth place is Winton Capital, the managed futures giant headed by David Harding, with AUM of $22.4 billion, up a stunning 64% in just 12 months.

The gains of the top five funds took their aggregate assets to $149.4 billion, accounting for 39% of the total assets managed by Europe50 firms. This is a 38% uplift for the top five firms from a year ago when their combined AUM was $108 billion. If it is true that hedge funds as a whole are back in business, it is the case that the leading players are doing exceptionally well when it comes to attracting investor custom.

Even the smallest firms surveyed managed to make big gains in aggregate from a year ago. The capital held by the 10 smallest firms in the survey, ranking 41st to 50th, saw AUM edge up 43% to $20 billion. These firms remain profitable (especially when performance fees are earned) but for hundreds of smaller firms, some well below the $1 billion threshold, the tough environment for capital raising and the cost of regulatory compliance is a dual burden. A handful of funds fell out of the Europe50, notably veteran manager RAB Capital which is to delist from AIM.

Among the newcomers to the Europe50 are several firms with major UCITS businesses. On the continent, these include German managers Aquila Capital and Conservative Concept Portfolio Management. Another newcomer that specialises in UCITS funds is French operator Exane Asset Management. Yet another UCITS manager making the grade is Insight Investment. Another new entrant, but with mainly offshore funds, is Clive Capital. One more newcomer is BlueGold Capital, which runs offshore funds specialising in energy, while another new entrant is IPM which is a managed accounts specialist.

As with previous Europe50 rankings, 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 a handful of cases we have provided an estimate of the money being managed. In these cases, we communicated with firms and canvassed a number of data sources to compile the published estimate.

The Hedge Fund Journal would like to thank the Newedge Prime Brokerage for continuing to sponsor the Europe50. We congratulate all the firms in the survey and give a special welcome to new entrants. We look forward to seeing managers of all sizes, including those below the threshold, make their mark in the coming years. Certainly the very difficult trading conditions that continue to roil markets offer a challenging backdrop for Europe’s leading asset managers to prove their mettle. We are certain that the results will bear watching.

A copy of the full report can be downloaded by clicking here