Billion Dollar Hedge Fund Club Grows to $889B

North American exits make way for European entrants to the group.

The club for the top hedge fund investors has just grown its total to represent one-quarter of all capital in the asset class today.

The Billion Dollar Club, which encompasses 247 institutions that have $1 billion or more in the asset class, now stands at $889 billion. Some of its largest managers by total assets under management include Bridgewater Associates, AQR Capital Management, and London’s Man Group.

Over the past year, 42 members have left its ranks, with 47 new participants replacing them, reports research firm Preqin. The most new entrants come from private sector pension plans. A majority of new entrants are also European, while more North American affiliates are leaving as they look to de-risk their plans. Former members include the California Public Employees Retirement System (CalPERS), the New York City Employees’ Retirement System, and the Alaska Permanent Fund Corp.

One of the newer members is the London-based John Lewis Partnership Pension Trust ($8.2 billion assets under management), which raised its hedge fund allocations by two percentage points (from 16% to 18% of total assets) in 2017 to gain acceptance.

Although the size of the group has increased from May 2017’s $802 billion cap, the mean allocations have dropped as class speculation continues due to lackluster performance and economic worries in recent years. The average member now allocates just 15% of their capital to hedge funds. In 2016 and 2017, total capital allocations were at nearly 17% and 16%, respectively.

Despite the downswing of allocations, Preqin determines that the club will be fine as investors fearing an equity downturn look to lower their positions on hedge funds. The reason? A constantly evolving market in terms of strategy and technology.

Prequin said that 2017 saw growth in “emerging sectors such as alternative risk premia as well as innovation in use of new technologies such as blockchain, artificial intelligence, and machine learning techniques,” and reported that the billion-dollar hedge club is “looking to embrace all these technologies, as the hedge fund industry enters its next stages of evolution.”

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