Top Managers Monopolizing HF Assets, Preqin Finds

Some 11% of hedge fund managers command an overwhelming 92% of total industry capital.

The world’s largest hedge fund managers are dominating the capital invested in the asset class, according to Preqin.

The data provider found the top 11% of managers controlled 92%—or $2.78 trillion—of total hedge fund assets at the end of Q1 2015. These 570 managers also each held at least $1 billion in assets, qualifying their membership of the “$1 billion club”.

“The $1 billion club has continued to grow over the past 12 months, both in terms of the assets they command and their influence on the hedge fund industry,” said Amy Bensted, Preqin’s head of hedge fund products.

Of these top firms, more than 400 managing $1 billion to $4.9 billion collectively controlled $892 billion while 22 managers with $20 billion or more, had $790 billion all together, the report said.

Older managers with a “consistently strong track record over many market cycles” were prominently featured in the $1 billion club, Preqin found. On average, managers with more than $20 billion were established in 1992.

These larger firms are also able to offer a wide range of strategies, the report said, allowing managers to benefit from diversification to generate even greater absolute returns.

According to the report, 41% of managers with more than $20 billion in assets offered four or more strategies while half of managers with $1 billion to $4.9 billion only provided a single core strategy.

The newer firms in this group of leading hedge fund managers were likely to show excellent performance over a shorter term to attract capital or spin out from older and larger firms.

Such links to larger hedge fund firms allowed newer managers to bring on existing track records and even some executives, the report said, to help establish trust and assurance with investors.

Preqin ranked Bridgewater Associates as the world’s largest hedge fund, with $169.5 billion in assets under management. AQR Capital and Man Investments came in second and third, managing $64.9 billion and $50 billion respectively.

Preqin HF

Related Content: Why Your (Smaller) HF Manager Might Not Be Worth the Fees; Cliff Asness Skewers Hedge Fund Rich List’s ‘Bad Math’

By Sage Um

«