The Europe 50 (2012)

In association with Newedge Alternative Investment Solutions

Originally published in the August 2012 issue

Welcome to the 7th Edition of the Europe50 where we survey the leading European hedge fund managers ranked by single manager assets at 30 June 2012. Notwithstanding considerable volatility in markets and broad economic uncertainty hedge fund assets have grown modestly over the past year to around $2.1 trillion, according to Hedge Fund Research. We believe that sourcing and publishing data about hedge funds provides an important service for investors as well as for the broader asset management industry.

The willingness of hedge fund managers to disclose this basic information has grown in recent years. Through this disclosure and a variety of other actions hedge funds are becoming more transparent. Much of this, of course, is a response to the investor base becoming increasingly dominated by pension funds, sovereign wealth entities and other institutional investors. The Hedge Fund Journal is nevertheless indebted to firms across Europe for participating in our 2012 survey.

Details on hedge funds
The following pages provide a succinct overview of the hedge funds managed by the Europe50 firms. This includes details about each firm’s individual funds, the different portfolio managers, the strategies they follow and where a particular fund is domiciled. Assets under management in managed accounts and in UCITS funds are also included where relevant. In accordance with the methodology of our UCITS Hedge database we only include funds where the prospectus permits managers to short individual securities.

The relative health of the UCITS sector is a matter of some debate in the alternative investment industry. Fund launches have diminished over the past year and several funds have been shuttered on business grounds due to an inability to attract sufficient investor allocations. In some cases, this is because a few funds in a strategy area have been particularly successful at wooing investors, leaving other funds with less AUM fighting over scraps. However, allocations from investors, including the relatively nascent retail market, continue to grow but at a slower rate than in 2009-2010 when launch activity was higher.

The challenge that both UCITS and offshore hedge funds face in common is quite simply the need to perform. With a few exceptions UCITS funds have provided mediocre returns with only a few big winners and a smaller number of major losers. Offshore hedge funds, meanwhile, continue to exhibit more volatility. For the first seven months of 2012 the UCITS Hedge Index is essentially flat (-0.03%), while the HFRX Global Hedge Fund Index is up modestly (+2.33%). The numbers mask a first quarter rally, a second quarter pull back followed by some very welcome gains in July.

Yet it is likely that the market’s range bound trading following the 2009 rally will continue. The ‘risk on, risk off’ dynamic is making it difficult for many managers to generate performance. Long/short equity funds with relatively high levels of net exposure have increasingly dialled this down. It is likely that the description ‘market neutral’ has never been more popular among long/short equity fund marketers.

CTA and macro funds grow
Unsurprisingly, the growth in hedge fund assets has occurred mainly with commodity trading advisors, global macro and relative value strategies. Yet some big onshore managers operating in multi-strategy as well as in long/short equity have also made a major impact on asset levels. The result is that the total assets under management of Europe50 firms rose over 7% to $414 billion, up from $385 billion in our mid-year 2011 survey. This is another record for the Europe50 and takes their total AUM further along from the early 2008 pre-crisis peak of $366 billion near the top of the last bull market.

The aggregate figure shows that investors are not only sticking with, but adding to their hedge fund investments. It could be argued that this a logical response to the very difficult trading conditions across asset classes. After all, hedge fund mangers have more tools available to try and generate performance than do their long only counterparts. The data also shows that $71.6 billion is held in UCITS funds, accounting for nearly 18% of total Europe50 AUM.   

Man Investments again took the top slot with $41.4 billion in AUM at 30 June, 2012 across its range of single manager funds, representing a jump of 21% from the $34.1 billion a year earlier. Much of Man’s gain reflected a jump in managed account assets to $7.6 billion from $1.4 billion. Moving up to the number two slot is Brevan Howard Asset Management with AUM of $36.7 billion, up a healthy 14% from the 30 June 2011 AUM of $32.1 billion. The Brevan Howard Multi-Strategy Master Fund nearly quadrupled AUM to $3.35 billion over the year, while the Brevan Howard Master Fund gained over $2 billion in assets owing to its resilient investment performance in 2011 under the aegis of Alan Howard.

Moving up one position to third in the Europe50 is BlueCrest Capital Management where AUM grew 16% to $31.1 billion from $26.8 billion a year earlier. BlueCrest added capital in both its discretionary funds overseen my Mike Platt and in its systematic funds managed by Leda Braga. Moving further up the table, from fifth to fourth, is Winton Capital Management with a 27% rise in AUM to $28.5 billion from $22.4 billion. Meanwhile, Standard Life Investments recorded the biggest jump in terms of funds managed with AUM more than doubling to $27.3 billion, a performance that took the firm to fifth overall, up from ninth a year ago.

The gains of the top five funds took their AUM to $165 billion, accounting for 40% of the total assets managed by Europe50 firms compared with 38% last year. Greater concentration of assets among the top five is a trend that continues unabated. Only two years ago they managed just $108 billion.

A very big splash for a new entrant is made by Cantab Capital Partners, the Cambridge-based global systematic manager founded in 2006. It enters the Europe50 ranked thirty-second as assets grew sharply to $3.1 billion. Capula edges into ninth as assets rose to $13 billion from $8.6 billion, while Paris-based CTA Capital Fund Management moves up to twenty first from thirty fourth, with AUM rising to $5.8 billion.

The Europe50 rankings focus 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 large, global asset managers can still qualify on the basis of the money being managed out of their European offices. The key criterion in these cases 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 few cases we have provided an estimate of the money being managed after communicating with firms and canvassing various data sources to compile the published estimate.  

The Hedge Fund Journal thanks Newedge Alternative Investment Solutions for continuing to sponsor the Europe50. We congratulate all the firms included and thank them for their cooperation in making the survey possible. The very difficult trading conditions that prevail in mid-2012 offer a challenging backdrop to measure the skills of Europe’s leading asset managers. How they perform in these markets will bear watching.

To download the full article, please click here