2016 Preqin Global Hedge Fund Report

2016 Preqin Global
Hedge Fund
Report
Sample Pages
ISBN: 978-1-907012-88-4
$175 / £105 / €150
www.preqin.com
alternative assets. intelligent data.
The 2016 Preqin Global Hedge Fund Report - Sample Pages
The 2016 Preqin Global Hedge Fund Report
- Contents
CEO’s Foreword
4
Section One: The 2016 Preqin Global Hedge Fund
Report
Keynote Address - Michael Hart, Amundi
5
Section Two: Overview of the Hedge Fund Industry
In Focus: Emerging Managers
57
In Focus: Regulation
58
Section Five: Overview of the Hedge Fund Industry by
Strategy
Overview of the Hedge Fund Industry by Strategy Introduction
59
60
Hedge Funds in Numbers
7
Equity Strategies Funds
After a Difficult 2015, Hedge Funds Need to Rise to
the Challenges of 2016 - Amy Bensted, Preqin
8
Macro Strategies Funds
62
Event Driven Strategies Funds
64
Hedge Funds: A Long-Term Partner - Richard H.
Baker, Managed Funds Association
9
Credit Strategies Funds
66
Relative Value Strategies Funds
68
Multi-Strategy Funds
70
Distribution Disrupted: How Marketing of Alternative
Funds Has Changed since the Financial Crisis - Jack
Inglis, AIMA
10
Section Three: Industry Performance in 2015
Niche Strategies Funds
72
Volatility Trading Funds
73
Activist Hedge Funds
74
Discretionary vs. Systematic Traders
76
In Focus: Regional Fundraising
78
Most Consistent Performing Fund: In Focus - David
Fraser, Tobie Lochner and Jacques Conradie,
Peregrine Capital
11
Industry Performance in 2015 - Introduction
12
Section Six: Timeline of Key Events in 2015
Performance Benchmarks
13
15
Predictions for 2015: How Accurate Were Industry
Professionals?
79
Overview of Hedge Fund Performance in 2015
Timeline of Key Events in the Hedge Fund Industry in
2015
80
Top Performing Hedge Funds
19
Most Consistent Top Performing Hedge Funds
27
In Focus: Performance in 2015 and Performance
Outlook for 2016
32
Section Seven: Investors & Gatekeepers
Section Four: Overview of the Hedge Fund
Management Industry
Investors & Gatekeepers - Introduction
83
League Tables - Largest Investors by Region
84
League Tables - Largest Investors by Type
85
Institutional Outlook for Hedge Funds in 2016
86
Know Your Investor
90
European Marketing for Third Country Alternative
Fund Managers - Ben Robins, Mourant Ozannes
95
Fund Searches and Mandates
96
40
Institutional Private Wealth Firms Investing in Hedge
Funds
99
Overview of Hedge Funds
42
Investment Consultants
101
Asset Flows in 2015
44
In Focus: Co-Investments
104
Sources of Inflows in 2015
45
Fund Manager Outlook for 2016
46
Section Eight: Funds of Hedge Funds
Management and Performance Fees
50
52
Atrevida - Navigating Volatile Markets: 2016 Fund
Launch in Focus - Duncan Hennes, Atrevida Partners
105
Liquidity Terms
Investor Attitudes towards Fund Terms and Conditions
54
Funds of Hedge Funds - Introduction
106
Overview of Funds of Hedge Funds
107
Equity Market Neutral: In Focus - Melissa Hill, Sabre
Fund Management
33
Overview of the Hedge Fund Management Industry Introduction
34
League Tables - Leading Hedge Fund Managers
35
Overview of Hedge Fund Managers
37
League Tables - Leading Hedge Funds
2
© 2016 Preqin Ltd. / www.preqin.com
The 2016 Preqin Global Hedge Fund Report - Sample Pages
Section Nine: CTAs
Section Twelve: Service Providers
CTAs - Introduction
111
Q&A with Interactive Brokers - Steven Sanders,
Interactive Brokers
127
Overview of CTAs
112
Service Providers - Introduction
129
Fund Administrators
130
117
Fund Custodians
131
118
Prime Brokers
132
Fund Auditors
133
Section Ten: Liquid Alternatives
Liquid Alternatives - Introduction
Overview of Liquid Alternatives
Section Eleven: Managed Accounts
Managed Accounts - Introduction
123
Overview of Managed Accounts
124
Law Firms
134
Fund Marketers
135
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The 2016 Preqin Global Hedge Fund Report - Sample Pages
1. The 2016 Preqin Global Hedge Fund Report
Keynote Address
- Michael Hart,
Deputy CEO, Amundi
Can you tell us about the Amundi
platform?
The Amundi platform was established
over 10 years ago, and completely
moved onshore in Ireland for more than
four years; in fact, the platform has been
AIFMD compliant well ahead of the
industry with the licence being obtained by
the French regulator on December 2013.
Today, we are among the few platform
players worldwide to offer a fully AIFMD
set-up, as onshore, controlled, regulated
investment solutions are central to the
firm’s offerings.
Through our platform we provide fully
customized and transparent portfolios
tailored to our clients’ needs. In contrast,
many other platforms are distribution
platforms; we are not. Funds on the
platform are used primarily as portfolio
management tools for our funds of hedge
funds, therefore ensuring an alignment of
interests with clients that invest directly in
our managed accounts.
What are the benefits to your clients of
a fully AIFMD-compliant platform?
As the pioneer in this space, we have
amassed sizeable experience in how to
deal with AIFMD. From an investment’s
perspective, an advantage of investing
in AIFMD-compliant hedge funds through
our platform is that we are able to deliver
more complex hedge fund strategies
that will not necessarily fit in the UCITS
wrapper, for instance strategies such
as fixed income relative value or global
macro.
funds,
especially
with
increasing
regulation and growing scrutiny on the
benefits of investing in hedge funds.
You have to be seen that you are really
doing your homework and you are doing
the utmost due diligence. After investing
in a hedge fund institutional clients also
have to demonstrate they are doing the
best possible monitoring. By investing
in hedge funds via a regulated and
transparent framework, they can prove
this.
we are global across the board. Again,
our job is to find the most suitable hedge
fund managers for our specific client
requirements. This could mean going
to the US West Coast, Latin America or
Southeast Asia. Investors expect us to
have a global reach and identify emerging
managers and mid-sized managers in all
regions, otherwise I am not sure they
would consider working with a platform
like ours. You really need to bring
something of clear value to the table.
Ultimately by being fully AIFMD compliant,
everything is transparent, controlled and
with no potential conflict of interest, and
that can only benefit the client.
What do you think 2016 holds for
managed accounts and for Amundi?
What types of hedge funds do you
look for?
We strive to be proactive rather than
reactive when creating portfolios. When
working with our clients, we take a
forward-looking approach at creating
the best customized solutions for them.
Much of this is listening to their needs;
you have two ears and one mouth and
we are strong believers in using them
in those proportions when helping our
clients. Therefore, we do not specialize in
any one strategy as all of our mandates
are bespoke. We cover a large universe
of managers that we can potentially
invest in and choosing among these is a
case of what specifically is best for each
client, rather than a general preference
for a strategy. So I would say Amundi is
quite agnostic when it comes to strategy;
it really is what meets the client’s
requirements going forwards in time that
is important.
From an investor’s perspective, our
AIFMD platform is fully onshore and
highly regulated which provides many
benefits. Institutional investors can show
they are following a code of best practice
– so from a corporate governance point
of view this is a key advantage which can
be highlighted to their boards or trustees.
Another advantage of our AIFMDcompliant platform is that we have to
use third-party external providers. So,
for instance, we cannot use our in-house
prime broker. As a result, there are no
potential conflicts of interest.
When looking at the fund managers on
our platform, instead of just looking in
the rear-view mirror, we look at changing
market conditions and at which managers
we think are going to perform better over
the next few years. So when it comes
to the types of fund managers we work
with, we are also fairly open minded. We
will not invest if there is huge turnover
at the firm or if it has had a poor track
record through different market cycles,
but beyond that when we go into due
diligence we are open minded.
I believe it is the way forward for
institutional clients to invest in hedge
Although fund managers have to comply
with AIFMD requirements, geographically
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Volatility is returning to markets; it has
gone from historic lows and is now only
just reaching historic averages and it
could increase further. So 2016 could be
a period of transition. The volatility factor,
and more uncertainty in the markets,
could further highlight the strengths
of a fully regulated onshore managed
accounts platform.
When looking at our portfolios, we will
remain very much client driven and
opportunistic. We will still be searching
for any hedge fund that exhibits any
potential for good risk/reward return.
We take a tactical and strategic sixand twelve-month view in how we think
certain managers are going to perform in
that market environment. For instance,
we just looked at a global macro fixed
income fund that plays the convexity
card. The fund has had a successful year
– they are up about 6% net. When there
was no volatility in the market they were
finding it difficult, but now we think market
conditions are playing in their favour. So
it is by looking at strategies like that and
thinking about how they will perform now
and in the next year, even though in the
past when we had been monitoring them,
we would have been unlikely to invest. In
2016 we will continue to be opportunistic
and open minded.
What changes have you seen in your
investor base in 2015?
We have seen corporate governance
become very important for corporate
pension schemes. Although corporate
governance has always been important for
the LGPS schemes, this was something
corporate pension funds considered but
5
The 2016 Preqin Global Hedge Fund Report - Sample Pages
it was not at the forefront of their minds.
However, this has really been changing
and is becoming more important for them
than it was in the past. A fully AIFMDcompliant managed account platform can
help those schemes concerned about the
corporate governance point of view.
We have also seen institutional pension
funds that had been bruised in the past
by hedge funds coming back. There is a
growing demand for relatively defensive,
uncorrelated, bespoke solutions from
investment managers and we have been
asked several times over 2015 to assist
with trustee training on managed account
platforms. We explain to the trustees
what a managed account platform is,
how it differs from going direct, and how
being onshore is a far more regulated and
secure route than existed in the past. We
are there to assist trustees in making an
informed decision and not to push our
product which I think is very important.
Hedge funds have been easy to bash in
the past, and many trustees do not fully
understand these complex products.
We have seen a growing demand to
help improve awareness that hedge
funds can benefit them and reduce the
1. The 2016 Preqin Global Hedge Fund Report
overall risk and volatility in their portfolio.
So it is a case of showing that these
products can have returns of 2-5% net,
can manage the downside, have low
volatility, extremely low beta and be very
uncorrelated to your fixed income and
equities investments. So, although some
investors are looking at hedge funds in
isolation as a high-volatility but hopefully
high-return investment, the majority of
investors at the moment that are going
back into hedge funds want something
more conservative, and they are looking
at how it is going to benefit their whole
portfolio rather than just looking at it as an
asset class entirely in isolation.
Is there anything else you would like
to add?
There is a lot of pressure on hedge funds
at the moment. An Australian politician
came out just before I travelled there
at the end of 2015 and said that “we
cannot predict the outcome of manager
performance but we can predict fees”.
This is characteristic of the growing
pressure on fees. In this example in
Australia the focus was across all
alternatives. However, rather than looking
at the value for money these products
can offer, they were just concerned
with stamping down on fees. This puts
pressure on hedge funds, because in our
opinion they are the most liquid of the
alternative assets. If, for example, I am
a pension fund manager, and I am under
pressure from the government to reduce
fees, I cannot really redeem my interests
in private equity even though they are
more expensive and the fees are likely
to be higher, as they are too illiquid. So
this means that hedge funds are going to
have to really prove that they are offering
value for money and that you are getting
what you pay for.
With a managed account platform, you
are not only getting the performance of
the underlying managers, but you are
also getting all of the monitoring and
policing of the underlying managers. It is
almost that you are getting an insurance
policy in that the platform provider is there
to ensure the underlying managers do not
misbehave, that there is no style drift, and
you get that by receiving the complete
look through and transparency. We are
there to ensure that the managers will
do what they say they will do and that
reassures investors.
Michael Hart is deputy chief executive officer and global head of business development at Amundi Alternative Investments,
member of the Executive Committee. Michael has more than 20 years of experience in the alternative investment space. He
notably acquired a broad-based expertise on pension funds for Bfinance investment consultants from 2000 to 2011 where he
established and developed the Institutional Pension Fund Business.
Amundi Alternative Investments is the specialist alternative boutique of Amundi. With just below $6.5 billion in assets1,
the firm has a strong expertise in hedge fund selection, as demonstrated by the creation of a Managed Account Platform in
2005, and in FoHF engineering, with a track record that began more than two decades ago. Amundi Alternative Investments
has a strong expertise in providing a bespoke holistic consultative approach, rather than a one size fits all product offering.
Through its unique multi-management expertise, and its Managed Account Platform based in Ireland, Amundi partners with
its clients to provide suitable alternative investment solutions for various risk, return, liquidity, transparency and decorrelation
objectives, based on their needs.
As a pioneer in EU-regulated alternative solutions, Amundi AI has embraced the AIFM & UCITS directives and made strategic
choices in re-domiciling all its alternative investments in onshore places (France, Luxembourg, Ireland).2
www.alternatives.amundi.com
1
2
Amundi AI figures as of 31 December 2015.
Amundi AI has obtained its AIFM authorization in December 2013.
6
© 2016 Preqin Ltd. / www.preqin.com
The 2016 Preqin Global Hedge Fund Report - Sample Pages
2. Overview of the Hedge Fund Industry
Hedge Funds
in Numbers
Growth in Assets, Number of Investors and Number of Funds in 2015
$3.197tn
$71.5bn
Hedge fund industry assets under
management reach nearly $3.2tn
as of November 2015.
The hedge fund industry added
$71.5bn in new capital inflows in
2015.
+134 funds
5,000+
829
More than 5,000 institutional
investors allocate to hedge funds.
695
829 hedge funds
launched in 2015; in
contrast, 695 funds
closed.
Performance in 2015
+2.02%
62%
The Preqin All-Strategies Hedge
Fund benchmark returned 2.02% in
2015.
of hedge funds posted positive
returns.
33%
40%
of investors believe performance
expectations were not met in 2015.
of fund managers believe their
performance objectives were not
met in 2015.
Fundraising Could Become Challenging
Better Performance and New Launches Expected in 2015
25%
69%
Fundraising could become
challenging in 2016 as more
investors (32%) plan to cut back
on hedge funds than plan to
increase exposure (25%).
Fund managers are confident of
better performance: 69% believe
the Preqin All-Strategies Hedge
Fund benchmark will be higher in
2016 than in 2015.
32%
72%
However, fund managers
remain optimistic: 72% believe
industry AUM will increase in
2016 compared with 13% that
believe industry assets will
decline.
29%
of fund managers have plans for a
new launch in 2016.
13%
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7
The 2016 Preqin Global Hedge Fund Report - Sample Pages
2. Overview of the Hedge Fund Industry
After a Difficult 2015, Hedge Funds
Need to Rise to the Challenges of 2016
- Amy Bensted, Preqin
2015 proved a challenging year for the
hedge fund industry. Although the year
started well, with hedge funds making
gains in each of the first five months
of 2015, a series of events across
the globe hit many of the markets
traded by hedge funds. This resulted
in four months of losses from June to
September, the longest losing streak
for hedge funds since 2008. By the
end of 2015, hedge funds had returned
just 2.02%, representing the Preqin AllStrategies Hedge Fund benchmark’s
worst performance since 2011. Although
the benchmark outperformed the S&P
500 over the year, this poor performance
did not go unnoticed by investors:
approximately a third of institutional
investors reported to Preqin that hedge
funds had failed to meet expectations in
2015. Many fund managers themselves
were disappointed with performance in
2015: 44% of fund managers reported
that their funds had failed to meet return
objectives in 2015. However, amid the
performance difficulties of 2015 there
were some bright spots; in particular,
the industry recorded net capital inflows
of $71.5bn, taking the size of the hedge
fund industry to nearly $3.2tn.
performance in times when traditional
markets are struggling, then maybe the
value of hedge funds can be proved to
those investors that are currently taking
a cautious approach to the asset class.
During periods when many investors
believe performance is poor, the fees
associated with hedge funds are often
increasingly
scrutinized.
Although
management and performance fees – as
shown in ‘Management and Performance
Fees’ (page 50) – have been on a general
downward trend over recent years,
high levels of investors still want to see
further reductions in these terms over
the course of 2016. The need to change
fee structures could add additional
pressures on hedge fund managers. The
cost of running a successful hedge fund
has increased over recent years as fund
managers have invested in improving
their business infrastructure to cope with
an increasingly sophisticated client base
and to adapt to new regulations. The
calls to cut fees further could make it
more difficult to run a profitable business
in 2016 – in particular for smaller
managers.
How to Successfully Navigate 2016
More Challenges Ahead in 2016
With 2015 behind us, what does 2016
hold for the hedge fund industry? In our
end-of-year survey of 150 institutions,
more investors indicated that they
will invest less capital in hedge funds
in 2016 than in 2015, which could
mean that raising new capital, as well
as retaining capital, could become
increasingly difficult over the course of
this year. Although we have seen similar
levels of disappointment in hedge fund
performance to 2015, in 2011 and 2014
for instance, this is the first time (since
Preqin began tracking institutional
investor activity in hedge funds in
2007) that we have seen a net change
in appetite in favour of investors taking
capital out of their hedge fund portfolios.
Fund managers and investors agree
that performance will be the leading
challenge for the hedge fund industry
in 2016, so perhaps performance
will be the key to the success of the
industry over the year. If hedge funds
can navigate the changeable economic
environment and continue to show better
8
Although further investment in their
business operations is difficult in light of
calls for reduced fees, it could be vital
to the success of a hedge fund in 2016.
Investors are seeking improvements
in performance; therefore the 41% of
fund managers looking to beef up their
portfolio management capabilities may
be better placed to navigate the volatile
environment in 2016 and win back
investor favour. Transparency is another
issue at the forefront of investors’ minds.
Investors increasingly want to better
understand the source of their hedge
fund performance, for better or worse,
and those fund managers that are
able to provide the much demanded
transparency, as well as educate
investment officers and trustees on the
benefits of investment in hedge funds,
may be well placed to retain existing
clients as well as gain fresh assets.
Originally a product used exclusively
by wealthy individuals and families,
institutional
investors
began
to
increasingly use hedge funds in the early
2000s. Today, Preqin tracks over 5,000
institutions that invest in hedge funds,
with this number growing on a daily
basis. Despite some notable investors
cutting hedge funds from their portfolios
over the past few years – CalPERS,
PFZW and Railpen to name a few – the
majority of institutional investors look
set to remain active in hedge funds
over the longer term. However, hedge
fund managers have also reported that
sources of private wealth – family offices
and wealth managers – are once again
increasing their allocations to their funds.
With changes to regulations allowing the
proliferation of alternative structures in
hedge funds, such as UCITS in Europe
and alternative mutual funds in the
US, fund managers have also reported
growth in assets from retail clients. As
the universe of investors active in hedge
funds becomes increasingly diverse, the
hedge fund managers with products that
can appeal to a variety of investors may
be rewarded with a growing asset base.
For many investors, 2016 may be a
time to re-evaluate their hedge fund
portfolio. The performance of the
industry as a whole has been somewhat
disappointing,
with
two
back-toback years of returns below the level
expected by many investors. However,
there are some bright spots, with some
strategies and regional funds showing
strong performance in 2015, and many
individual funds showing significant
success. Investors may want to
rebalance their portfolios to ensure they
are well diversified in order to navigate
a potentially changeable economic
environment, and tools such as our
‘Most Consistent Top Performing Hedge
Funds’ league tables (see pages 27-31)
may help in assessing the long-term
success of a manager. With traditional
markets showing signs of problems at
the start of 2016 – for instance, the Dow
Jones Industrial Average and the S&P
500 showed their worst ever results
during the first trading sessions of the
year and the FTSE 100 crashed into a
bear market in the third week of 2016
– the need to diversify into all-weather
or non-correlated assets may become
more pressing and investors may need
to rethink their plans to cut back on
hedge funds over the year.
© 2016 Preqin Ltd. / www.preqin.com
The 2016 Preqin Global Hedge Fund Report - Sample Pages
3. Industry Performance in 2015
Performance
Benchmarks
Fig. 3.1: Summary of Performance Benchmarks, As of December 2015 (Net Returns, %)*
2015
2014
2013
2-Year
Annualized
3-Year
Annualized
5-Year
Annualized
3-Year
Volatility
5-Year
Volatility
Hedge Funds
2.02
4.65
12.22
3.33
6.21
5.43
3.78
4.68
HF - Equity Strategies
0.87
4.84
15.54
2.84
6.91
5.03
5.43
6.61
2.10
4.23
15.05
3.16
6.98
5.02
4.88
5.85
ES - Long/Short Equity
ES - Long Bias
-3.38
5.18
17.59
0.82
6.13
4.75
7.87
9.99
ES - Value-Oriented
-1.42
14.84
19.27
6.40
10.53
7.94
7.67
9.08
ES - Sector-Focused
1.43
9.74
14.50
5.11
8.15
4.60
7.07
8.23
ES - North America
0.50
6.95
22.15
3.70
9.54
7.54
6.11
7.09
ES - Europe
8.41
2.37
16.39
5.35
8.91
5.42
4.85
5.62
ES - Asia-Pacific
7.79
6.63
18.63
7.21
10.89
6.81
7.50
8.18
ES - Emerging Markets
-1.73
5.22
7.72
1.68
3.65
3.33
6.88
8.03
ES - Developed Markets
2.43
9.03
15.05
3.80
8.60
6.17
5.36
6.68
2.38
4.66
4.15
3.53
3.73
4.41
2.50
2.78
MS - Macro
4.24
6.64
5.34
5.43
5.40
5.85
2.84
2.86
MS - Commodities
-7.24
-3.09
-4.91
-5.18
-5.09
-2.96
4.97
6.77
HF - Macro Strategies
MS - Foreign Exchange
1.02
-3.50
1.42
-1.27
-0.38
1.06
3.49
3.46
-0.07
2.49
15.10
1.18
5.61
5.36
4.41
5.52
ED - Event Driven
0.63
3.58
17.60
2.06
6.97
6.17
4.76
5.91
ED - Distressed
-6.35
-2.39
15.71
-4.39
1.89
4.36
5.18
5.97
ED - Special Situations
0.93
0.80
13.80
0.83
4.96
4.03
5.46
6.48
ED - Risk/Merger Arbitrage
6.92
3.01
6.43
4.94
5.44
5.05
2.18
2.69
1.98
5.77
9.69
3.86
5.76
7.51
2.14
2.64
-0.76
3.20
9.53
1.20
3.89
5.57
2.60
3.04
HF - Event Driven Strategies
HF - Credit Strategies
CS - Long/Short Credit
CS - Fixed Income
1.28
4.44
5.84
2.85
3.84
6.00
2.41
2.70
CS - Mortgage-Backed Strategies
4.76
10.62
12.83
7.65
9.35
11.23
2.35
2.70
CS - Asset-Backed Lending
7.33
9.70
12.80
8.51
9.92
11.65
1.20
2.60
HF - Relative Value Strategies
5.03
4.63
9.30
4.79
6.29
6.24
1.63
1.78
RV - Equity Market Neutral
6.64
4.47
9.40
5.45
6.78
5.92
1.59
1.48
RV - Fixed Income Arbitrage
1.00
4.03
4.19
2.51
3.06
5.05
2.19
2.33
RV - Relative Value Arbitrage
6.50
5.63
12.27
6.06
8.10
8.24
2.39
2.70
RV - Statistical Arbitrage
5.64
4.56
8.51
5.10
6.22
7.41
2.92
2.88
RV - Convertible Arbitrage
4.76
4.84
16.51
4.80
8.57
6.51
3.61
4.49
RV - North America
4.83
5.96
7.12
5.22
5.91
6.36
1.61
1.87
RV - Europe
3.34
1.88
9.31
3.08
6.02
4.86
3.30
4.56
RV - Asia-Pacific
10.27
3.70
18.20
6.93
10.56
8.29
3.18
3.43
RV - Developed Markets
4.50
9.34
8.89
4.69
5.76
5.79
1.47
1.81
4.14
4.07
8.49
4.18
5.57
5.16
2.88
3.51
HF - Multi-Strategy
HF - Niche Strategies
NS - Insurance-Linked Strategies
3.14
7.18
7.57
4.74
5.85
5.36
1.01
1.61
NS - Niche
3.41
-2.84
4.95
4.27
8.26
6.99
6.59
5.80
HF - Trading Styles
Activist
3.03
6.02
17.64
4.52
8.72
5.88
5.68
7.33
Volatility
5.06
2.61
7.49
3.83
5.03
6.08
2.29
2.14
Discretionary
2.32
5.45
17.16
3.82
8.09
6.80
4.40
5.41
Systematic
5.92
5.88
7.64
5.99
6.53
5.66
2.68
2.85
HF - North America
0.47
6.45
17.14
3.40
7.79
7.19
4.52
5.36
HF - Europe
5.60
2.71
13.75
4.15
7.25
5.19
3.50
4.39
HF - Asia-Pacific
7.89
6.17
17.32
7.03
10.36
7.05
6.07
6.77
HF - Emerging Markets
1.15
4.14
6.98
2.63
4.06
4.18
5.08
5.95
EM – Asia
3.37
19.54
8.61
11.12
10.27
6.17
9.31
11.09
EM – Latin America
-1.33
1.35
1.96
0.00
0.65
3.63
4.95
5.09
EM – Africa
6.81
7.43
18.48
7.12
10.78
11.01
3.99
3.61
EM – Russia & Eastern Europe
-0.23
-23.73
0.68
-5.72
-2.61
-2.76
7.49
9.41
HF - Developed Markets
3.34
6.95
11.61
5.13
7.23
7.11
2.27
2.94
HF - USD
0.78
4.50
12.74
2.62
5.89
5.28
4.20
5.24
alternative assets. intelligent data.
13
The 2016 Preqin Global Hedge Fund Report - Sample Pages
2015
3. Industry Performance in 2015
2014
2013
2-Year
Annualized
3-Year
Annualized
5-Year
Annualized
3-Year
Volatility
5-Year
Volatility
3.48
HF - EUR
2.37
1.15
8.62
1.80
3.99
3.12
2.77
HF - GBP
0.48
-0.48
4.49
0.00
1.47
1.05
2.58
3.12
HF - CHF
3.90
3.10
8.02
3.50
4.98
3.61
3.46
3.98
HF - JPY
6.33
6.23
30.78
6.26
13.87
9.51
5.77
6.38
HF - BRL
7.12
5.99
5.12
6.55
6.07
7.97
3.73
3.40
HF - AUD
9.56
6.64
19.09
8.09
11.64
9.20
4.45
4.90
HF - CAD
1.16
5.61
9.46
3.36
5.36
1.70
4.35
5.76
HF - ZAR
13.36
11.33
17.26
12.34
13.96
14.30
3.80
3.26
HF - Emerging (Less than $100mn)
1.32
3.46
10.82
2.39
5.12
4.66
4.00
5.15
HF - Small ($100mn-$999mn)
2.93
5.09
12.60
4.02
6.81
6.09
3.61
4.51
HF - Medium ($500mn-$999mn)
1.86
3.51
12.34
2.68
5.81
5.88
3.62
4.22
HF - Large ($1bn plus)
2.17
6.57
12.78
4.35
7.09
6.55
3.27
4.40
Funds of Hedge Funds
1.13
3.86
8.51
2.49
4.46
2.91
3.07
3.33
FOHF - Equity Strategies
1.64
3.59
11.99
2.61
5.65
3.47
4.30
4.72
FOHF - Macro Strategies
-1.66
4.58
-0.86
1.63
0.72
-0.10
3.17
3.34
FOHF - Event Driven Strategies
-1.15
1.03
6.86
-0.13
2.60
1.46
3.72
4.64
FOHF - Credit Strategies
0.05
12.73
8.71
4.61
6.22
5.11
2.54
2.68
FOHF - Relative Value Strategies
1.27
1.63
4.92
1.63
2.92
2.31
2.18
2.22
3.04
FOHF - Multi-Strategy
1.21
3.79
8.55
2.50
4.48
3.00
2.88
FOHF - Funds of CTAs
-6.77
13.54
-1.88
2.89
1.27
-1.80
10.22
9.42
FOHF - North America
-0.63
5.34
13.38
2.32
5.88
4.58
4.02
4.32
FOHF - Europe
4.28
3.48
8.64
3.88
5.44
2.96
2.80
3.05
FOHF - Asia-Pacific
5.90
4.47
12.49
5.18
7.56
4.39
4.93
5.17
FOHF - Emerging Markets
5.09
6.11
7.11
5.60
6.10
5.40
3.98
4.06
FOHF - USD
0.16
2.83
8.97
1.50
3.93
2.46
3.30
3.64
FOHF - EUR
0.79
1.74
7.31
1.26
3.24
1.31
3.23
3.48
CTAs
-0.49
10.88
2.77
5.03
4.26
3.81
4.73
4.93
5.32
CTA - Discretionary
0.95
-1.69
6.19
-0.38
1.76
5.44
4.01
CTA - Systematic
-1.44
12.47
2.69
5.29
4.41
3.57
5.56
5.87
CTA - Trend Following
-1.72
15.28
1.67
6.44
4.83
3.06
6.56
7.05
CTA - Macro
1.67
10.64
0.94
6.03
4.32
3.66
4.33
4.34
CTA - Counter Trend
0.84
8.07
0.97
4.46
3.24
2.34
4.32
4.62
CTA - Pattern Recognition
-0.40
10.01
0.57
4.51
3.23
1.94
3.97
4.23
CTA - Arbitrage
-1.07
11.47
5.79
5.14
5.27
6.36
3.42
3.62
CTA - Option Writing
7.76
-2.49
0.79
2.11
1.93
3.30
7.48
7.75
CTA - North America
3.00
11.79
0.75
7.30
5.07
5.87
4.40
4.93
CTA - Developed Markets
-5.24
7.11
0.65
0.75
0.72
4.12
5.53
6.14
CTA - USD
-1.11
10.68
2.61
4.61
3.92
3.27
4.88
5.08
CTA - EUR
1.72
12.81
-0.98
7.10
4.33
2.82
6.81
6.79
Alternative Mutual Funds
-2.77
3.67
10.32
0.40
3.60
4.05
3.95
4.60
Alternative Mutual Funds - Equity Strategies
0.07
7.42
18.46
3.68
8.39
7.59
5.30
6.14
Alternative Mutual Funds - Macro Strategies
-7.93
-1.98
n/a
-5.00
n/a
n/a
n/a
n/a
Alternative Mutual Funds - Credit Strategies
-2.01
2.56
2.58
0.24
1.01
3.08
2.40
2.63
Alternative Mutual Funds - Multi-Strategy
-6.43
4.46
6.45
-1.13
1.33
n/a
6.25
n/a
Alternative Mutual Funds - North America
-2.00
5.96
16.77
1.90
6.63
6.74
5.47
6.79
UCITS Hedge Funds
0.31
1.64
6.58
0.96
2.79
2.01
3.46
3.97
UCITS - Equity Strategies
1.86
1.94
12.30
1.89
5.21
3.37
5.06
5.94
UCITS - Macro Strategies
-2.65
1.76
0.62
-0.47
-0.11
-0.15
3.35
3.46
UCITS - Event Driven Strategies
-0.64
0.14
6.28
-0.25
1.88
1.10
3.45
3.64
UCITS - Credit Strategies
-1.98
1.46
2.63
-0.33
0.60
1.73
2.64
3.24
UCITS - Relative Value Strategies
0.73
0.70
3.17
0.70
1.49
1.21
1.31
1.68
UCITS - Multi-Strategy
1.06
4.37
5.72
2.54
3.90
2.58
3.79
3.85
UCITS - Europe
5.63
2.38
9.85
3.99
5.91
4.19
3.25
3.92
UCITS - Asia-Pacific
1.30
0.85
12.23
1.08
4.67
2.88
6.82
7.73
UCITS - Emerging Markets
-5.78
-0.41
5.15
-3.16
-0.54
-0.73
8.36
9.16
UCITS - Developed Markets
-0.03
0.44
6.87
0.19
2.35
1.45
2.78
2.86
UCITS - USD
-1.83
0.30
6.87
-0.78
1.69
1.22
4.23
5.08
UCITS - EUR
1.61
1.93
6.25
1.79
3.25
2.16
3.45
3.78
UCITS - GBP
0.81
1.93
8.47
1.39
3.70
2.43
3.48
3.75
UCITS - CHF
-0.78
2.35
3.25
0.73
1.50
0.32
3.19
4.66
*Please note, all performance information includes preliminary data for December 2015 based on net returns reported to
Preqin in early January 2016. Although stated trends and comparisons are not expected to alter significantly, final benchmark
values are subject to change.
14
Source: Preqin Hedge Fund Analyst
© 2016 Preqin Ltd. / www.preqin.com
The 2016 Preqin Global Hedge Fund Report - Sample Pages
4. Overview of the Hedge Fund Management
Industry
Overview of
Hedge Fund Managers
Preqin’s Hedge Fund Analyst tracks
over 6,000 fund management firms
operating in the hedge fund sector.
These institutions manage a range of
hedge fund investment products, from
traditional commingled funds to liquid
alternatives. In this section we present a
breakdown of the hedge fund manager
universe.
Fig. 4.9: Breakdown of Hedge Fund Managers by Region
4%
17%
North America
Europe
Regional Breakdown
North America is the most established
region in the hedge fund industry and
accounts for the majority (60%) of
managers (Fig. 4.9). Nineteen percent
of hedge fund managers are based in
Europe; of these, more than half (52%)
are headquartered in the UK. AsiaPacific hedge fund managers constitute
17% of all firms within the industry,
with the majority of these based in the
financial centres of Hong Kong, Australia
and Singapore. Beyond North America,
Europe and Asia-Pacific, the industry is
less developed and only 4% of managers
are located outside these key regions
(Rest of World). Of the Rest of Worldbased hedge fund managers, 37% are
headquartered in Brazil, followed by 23%
in South Africa and 8% in the United Arab
Emirates.
Asia-Pacific
19%
60%
Rest of World
Source: Preqin Hedge Fund Analyst
Fig. 4.10: Hedge Fund Manager Assets under Management by Region
Region
North America
alternative assets. intelligent data.
2,314
Europe
685
Asia-Pacific
159
Rest of World
Total
39
3,197
Source: Preqin Hedge Fund Analyst
Assets under Management
Hedge fund industry assets, as of 30
November 2015, stood at just under
$3.2tn, increasing by $178bn from
2014 (Fig. 4.10). North America saw the
greatest absolute increase as the assets
of managers in the region grew by $116bn
to over $2.3tn over the course of the year.
However, in percentage terms, the 5%
increase in North American assets was
surpassed by 12% growth in Europe, as
the assets under management (AUM)
of Europe-based managers increased
by $76bn to $685bn. This followed
strong growth over the year in several
European countries, including the UK,
France and Switzerland. Conversely,
AUM in Jersey has decreased
considerably over the past year. This
is largely attributable to changes within
the two largest fund managers based
in the territory: Brevan Howard and
BlueCrest Capital. DW Partners spun out
of Brevan Howard in January 2015; the
new firm is headquartered in New York.
More recently, BlueCrest announced
Assets under Management ($bn)
Fig. 4.11: Hedge Fund Manager Assets under Management by Manager
Headquarters
Manager Headquarters
Assets under Management ($bn)
US
2,279
UK
472
Hong Kong
67
Sweden
38
France
38
Singapore
35
Jersey
34
Switzerland
34
Australia
31
Brazil
29
Source: Preqin Hedge Fund Analyst
in December 2015 that it would begin
returning investor capital in order to
convert to a family office.
The Asia-Pacific region manages
$159bn, a 10% increase from 2014. The
largest change was observed in regions
beyond North America, Europe and Asia:
AUM in Rest of World fell from $67bn in
2014 to $39bn in 2015, a decrease of
52%. The greatest decline was seen in
Brazil, where AUM fell by $22bn during
the year. Part of this reduction in assets
can be attributed to the Brazilian Real’s
37
The 2016 Preqin Global Hedge Fund Report - Sample Pages
4. Overview of the Hedge Fund Management
Industry
Asset Flows in 2015
outstripping the $31.7bn of new capital
received by European funds. Following
strong inflows during the first half of the
year, Asia-Pacific-based hedge funds had
a difficult H2 and ended the year having
suffered an overall net outflow of $1.3bn.
The hedge fund industry saw a net
inflow of $71.5bn during 2015, as of 30
November 2015 (Fig. 4.33), with the
majority of this figure coming in the first
half of the year. More than half of the
inflows were secured by equity strategies
despite net outflows during the third
quarter of the year. Many investors pulled
their capital out of the strategy following
the global volatility in public markets
during this time. Despite the volatile
performance of CTAs during 2015,
investors continued to allocate capital to
the strategy with $25.4bn of new capital
inflows during the year.
Preqin’s analysis shows that a greater
proportion of larger funds received net
inflows compared to smaller funds (Fig.
4.34). More than half of funds over
$500mn in size received inflows during
2015. In contrast, 53% of funds managing
less than $100mn experienced net
redemptions during the year.
Regionally, North America-based funds
have seen the largest inflows throughout
the year, with $79.6bn of inflows
There were varying fortunes across
different strategies in 2015. More than
half of CTAs secured net inflows during
the year, with 52% of funds receiving new
capital, whereas 58% of macro strategies
hedge funds saw net redemptions (Fig.
4.35).
Preqin estimates industry asset flows from
performance and asset growth information
for over 12,200 hedge fund track records,
as showcased on Preqin’s Hedge Fund
Analyst. Flows are estimated based on
a sample of funds with available size and
performance data and scaled up based
on the proportion of represented capital
by strategy, headquarters location and
fund classification.
Fig. 4.33: Quarterly Asset Flows by Strategy
Q1 2015 Asset
Flows ($bn)
Q2 2015 Asset
Flows ($bn)
Q3 2015 Asset
Flows ($bn)
Q4 2015 Asset
Flows ($bn)*
2015 Total ($bn)
Equity Strategies
29.6
28.8
-1.7
0.4
57.1
Multi-Strategy
12.2
5.2
7.8
1.3
26.5
CTAs
11.3
-4.8
16.7
2.2
25.4
Strategy
Credit Strategies
-3.7
15.1
-2.0
-5.7
3.6
Event Driven Strategies
-1.6
12.3
-1.8
-7.3
1.7
Niche Strategies
-0.1
-0.6
1.4
0.5
1.1
-15.3
5.6
-5.3
-3.2
-18.3
Macro Strategies
-3.4
-14.0
-11.2
3.1
-25.6
All Hedge Funds
28.8
47.5
3.9
-8.7
Relative Value
Strategies
71.5
Source: Preqin Hedge Fund Analyst
*Q4 2015 asset flows estimated to 30 November 2015.
Fig. 4.34: Asset Flows over 2015 by Fund Size
Fig. 4.35: Asset Flows over 2015 by Strategy
Niche Strategies
Over $1bn
55%
2%
86%
CTAs
52%
Multi-Strategy
$500-999mn
60%
$100-499mn
2%
54%
Less than $100mn
41%
4%
6%
20%
40%
48%
45%
45%
5%
50%
Credit Strategies
43%
9%
48%
Event Driven Strategies
42%
Macro Strategies
41%
42%
7%
51%
1%
58%
53%
60%
80%
100%
No Change in 2015
Net Outflow in 2015
Source: Preqin Hedge Fund Analyst
44
7%
43%
Equity Strategies
37%
0%
Proportion of Funds
Net Inflow in 2015
4%
38%
Relative Value Strategies
0%
0% 14%
43%
Net Inflow in 2015
20%
6%
40%
57%
60%
80%
100%
Proportion of Funds
No Change in 2015
Net Outflow in 2015
Source: Preqin Hedge Fund Analyst
© 2016 Preqin Ltd. / www.preqin.com
The 2016 Preqin Global Hedge Fund Report - Sample Pages
5. Overview of the Hedge Fund Industry by
Strategy
Macro Strategies
Funds
Key Facts
1,071
2,100
Number of active macro strategies funds
in market.
Number of institutions investing in macro
strategies funds.
642
Number of hedge fund managers offering
a macro strategies fund.

+1.32%
-7.24%
$64.94bn
The highest monthly return generated
by macro strategies hedge funds in 2015
(posted in March).
Commodities hedge funds returned
-7.24% in 2015; in comparison, macro
funds made gains of 4.24%.
Size of the largest macro strategies fund,
Bridgewater Pure Alpha Strategy 12%.
Fig. 5.9: Breakdown of Macro Strategies Fund Launches
by Strategy and Year of Inception
Fig. 5.10: Breakdown of Macro Strategies Funds by
Strategy
Proportion of Fund Launches
100%
90%
16%
80%
5%
9%
70%
Foreign Exchange
60%
Macro
14%
50%
40%
79%
30%
Commodities
Commodities
Macro
Foreign Exchange
20%
10%
0%
Pre-2000
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
77%
Year of Inception
Source: Preqin Hedge Fund Analyst
Source: Preqin Hedge Fund Analyst
Fig. 5.11: Breakdown of Investors in Macro Strategies
Funds by Type
4%
Fund of Hedge Funds
Manager
Foundation
6%
5%
24%
6%
Private Sector Pension
Fund
Endowment Plan
Public Pension Fund
6%
Data Source:
Preqin’s Hedge Fund Analyst provides detailed
information on over 1,000 macro strategies hedge funds.
Comprehensive
profiles
include
assets
under
management, monthly returns, strategy and regional
preferences, and much more.
Family Office
For more information, please visit:
9%
17%
Wealth Manager
Asset Manager
9%
14%
www.preqin.com/hfa
Insurance Company
Other
Source: Preqin Hedge Fund Investor Profiles
62
© 2016 Preqin Ltd. / www.preqin.com
The 2016 Preqin Global Hedge Fund Report - Sample Pages
6. Timeline of Key Events in 2015
Timeline of Key Events in the
Hedge Fund Industry in 2015
January
Swiss De-Peg Results in Winners and Losers
January
The Swiss National Bank’s decision in January 2015 to remove the cap on the value of the Swiss
franc against the euro led to swings in currency markets. The Swiss franc lost 17% against the euro,
the USD-CHF rate dropped approximately 30% and Swiss stocks fell 13%, all in one day. Due to
this volatility, there were some major wins and losses for hedge funds. Notably, the $830mn Everest
Capital Global Fund closed in February, and the currency movement was cited as a main factor in the
closure of six out of seven of Everest’s funds in March. In comparison, Switzerland-based Quaesta
Capital generated +14.36% in January through its v-Pro Dynamic fund (GBP – P share class).
February
More Acquisitions for Man Group
February
Man Group announced that it was to acquire the asset management business of NewSmith. The
acquisition, the latest in a long line by the group, led to Man gaining a Japanese hedge fund, a new
Tokyo office and an expanded team in London. Other recent acquisitions by Man Group include Numeric
Investments and Pine Grove in 2014.
March
Q1
Best Quarterly Performance of 2015
Hedge funds had a good start to the year, adding 3.05% in Q1 2015 – the best quarter since Q4 2013, and
ultimately the best quarter of 2015.
April - June
Trend Reversals in Oil Markets Foil CTAs
April
In April, following a report that US oil and natural gas drilling activity fell to a six-year low and supply concerns
grew as a result of tension in the Middle East in turn, oil prices began to rally, reversing trends of falling prices in
Q1. However, OPEC’s June announcement that they will not cut oil production caused fears of over production
and led to declining oil prices and further trend reversal. With many CTAs trading instruments derived from oil
prices, CTAs were unable to follow the sharp trend reversals and the benchmark posted a loss of 3.73% in Q2,
almost wiping out the +4.29% Q1 return.
May
June - July
Greek Debt Crisis Hits European Hedge Funds
Concerns over a potential “Grexit” had been growing since June when newly elected Prime
Minister Alexis Tsipras announced a surprise referendum on whether Greece should accept bailout
conditions, Greek banks closed and Greece missed a payment to the IMF. The uncertainty in
Greece sent shockwaves throughout European markets. On 13 July 2015 Greece and Europe
agreed a deal for an €86bn bailout over the course of three years. Hedge funds in the region were
not immune to the volatility caused by these events, and Europe-focused funds lost 1.05% in June.
However, following the bailout in July they were able to post gains of 0.94%. In fact, over the course of 2015, Europe-focused funds
were able to outperform the wider All-Strategies Hedge Fund benchmark, with each making gains of 5.60% and 2.02% respectively.
June
6%
5%
4%
3%
2%
1%
0%
-1%
-2%
-3%
2.12%
0.82%
0.88%
0.09%
-0.90%
January
February
March
Monthly Return
80
1.39%
April
May
June
Cumulative Return
© 2016 Preqin Ltd. / www.preqin.com
The 2016 Preqin Global Hedge Fund Report - Sample Pages
7. Investors & Gatekeepers
Institutional Outlook
for Hedge Funds in 2016
CTAs made a promising start to 2015,
but the strong performance in Q1 was
86
9%
21%
80%
Exceeded
Expectations
70%
57%
60%
58%
Met Expectations
50%
63%
40%
Fallen Short of
Expectations
30%
20%
10%
35%
33%
2014
2015
16%
0%
2013
Source: Preqin Investor Interviews, November 2015
Fig. 7.13: Hedge Fund Portfolio Performance in 2015 Relative to Expectations
of Institutional Investors by Strategy
100%
9%
90%
80%
47%
70%
60%
78%
69%
68%
66%
44%
42%
63%
Met
Expectations
50%
91%
53%
56%
Macro
Strategies
31%
38%
58%
Event Driven
Strategies
22%
34%
Funds of
Hedge Funds
10%
32%
Equity
Strategies
20%
Multi-Strategy
30%
Credit
Strategies
40%
Managed
Futures/CTAs
Fig. 7.13 shows for investors in each
particular strategy whether returns
met or fell short of expectations during
2015. Relative value strategies were
rated highly by investors: 78% of those
surveyed stated that the strategy had
met expectations. With high volatility
in equity markets, the market-neutral
characteristics of relative value strategies
saw them deliver smoother returns than
other strategies; the Preqin All-Relative
Value Strategies benchmark ranked
as the top performing strategy of 2015,
coupled with the lowest volatility.
8%
90%
Fallen Short of
Expectations
Emerging
Markets
0%
Relative Value
Strategies
With periods of uncertainty impacting
global markets in 2015, hedge fund
managers have had to navigate
volatile market conditions in order to
deliver positive returns. As Fig. 7.12
demonstrates, investor satisfaction with
the performance of hedge funds in 2015
remained at a similar level to 2014’s
survey. Fifty-eight percent of investors
reported returns had met expectations in
2015; a further 9% reported returns had
been exceeded. Although a significant
proportion (33%) of investors stated
that their hedge fund investments fell
short of expectations, on the whole,
investors’ outlook on performance has
not worsened since 2014, despite a
particularly turbulent period between
June and September 2015 leaving the
benchmark more than two percentage
points below the 2014 return. However,
we did see a drop in investor satisfaction
with the returns of hedge funds from
2013 to 2014, and the low, single-digit
benchmark return of 2015 has done little
to win over the 33% of investors that are
sceptical about the performance of the
sector.
100%
Proportion of Respondents
Did Hedge Fund Portfolios Meet
Expectations in 2015?
Fig. 7.12: Hedge Fund Portfolio Performance Relative to Expectations of
Institutional Investors, 2013 - 2015
Proportion of Respondents
In November 2015, Preqin analysts
conducted in-depth interviews with
150 institutional investors in order to
assess their current attitudes towards
hedge funds and establish their outlook
for the industry in 2016. This section
assesses hedge fund investor attitudes
towards a variety of different topics, such
as performance, their outlook on the
industry in 2016 and fund preferences for
the year.
Source: Preqin Investor Interviews, November 2015
effectively wiped out during Q2 and the
strategy subsequently experienced a
difficult year. Despite this, managed
futures/CTAs retained positive sentiment
among investors with 69% viewing the
strategy favourably. This represents a
turnaround in the perception of CTAs,
with surveys in both 2013 and 2014
showing that dissatisfied investors
outnumbered the satisfied, perhaps as
investors reassess their performance
expectations from these funds.
Sixty-eight percent and 66% of investors
in multi-strategy and equity strategies
funds respectively had their return
expectations met over the course of
2015. Fund of hedge funds, for which
63% of investors in these funds felt
their return expectations had been met,
completes those strategies where more
investors believed their return objectives
had been fulfilled in 2015 than unfulfilled.
At the other end of the spectrum, event
driven and macro strategies funds
© 2016 Preqin Ltd. / www.preqin.com
The 2016 Preqin Global Hedge Fund Report - Sample Pages
7. Investors & Gatekeepers
Know Your Investor
In 2014, one of the leading events in
the hedge fund sector was CalPERS’
announcement that it planned to exit its
hedge fund investments. The $297bn
retirement system signalled its departure
in September 2014, citing concerns
regarding cost and complexity as the
main cause for redemptions. This led
to a number of industry participants
questioning whether this would be
the first sign of further outflows from
institutional investors. However, what
materialized in 2015 was the reverse
of this: in total, the hedge fund industry
saw $71.5bn in inflows in 2015, and 59%
of fund managers reported that their
assets under management (AUM) grew
over 2015 (see page 46: ‘Fund Manager
Outlook for 2016’).
However, despite more capital continuing
to flow into hedge funds, the prolonged
performance difficulties faced by much
of the industry, compounded by 2015’s
benchmark return being the lowest
since 2011, had led to concerns from
a wider group of investors regarding
investment in hedge funds (see page
86: ‘Institutional Outlook on Hedge
Funds in 2016’). This, combined with
an increasingly sophisticated audience
of institutional investors active in hedge
funds, is leading to further changes
within investor portfolios, as institutions
evolve not only in how they invest in the
asset class but also in their expectations
from the industry.
With more than 5,000 institutional
investors now actively investing in hedge
funds to diversify their portfolio and add
a source of risk-adjusted returns, we
examine the investor universe in greater
detail to discover more about their
investment activity in the asset class.
Public Pension Funds
The participation of public pension funds
in the hedge fund sector had been under
scrutiny since CalPERS announced
its exit. However, far from signalling
a wider departure of public pension
capital from the asset class, the opposite
appears true: in 2015 public pension
funds increased their allocations and
now account for a greater proportion of
institutional capital invested in hedge
funds than in 2014. Twenty-three percent
of the capital invested in hedge funds
by institutions is sourced from public
pension funds (Fig. 7.21), representing
the largest proportion of all institutional
investors and an increase from 20% in
2014. In turn, the average allocation to
hedge funds of public pension funds has
also increased by 50 basis points, from
7.8% in 2014 to 8.3% in 2015 (Fig. 7.24).
In fact, public pension funds have steadily
been increasing their allocation to hedge
funds since 2008, when they invested an
average of 5.7% of their portfolio in the
asset class. As well as existing public
pension fund investors in hedge funds
increasing their allocations, we have also
witnessed more public pension funds
considering their first investments in the
asset class. An example is Police Mutual
Aid Association, the South Korea-based
scheme set up in 1989 to promote the
welfare and livelihood of the police force
in the country. It is currently considering
adding funds of hedge funds to its
portfolio.
As well as growing the size of their hedge
fund portfolios, a larger number of public
pension funds have been adding singlemanager hedge funds to their portfolio.
Twenty-two percent of public pension
funds access hedge funds by making
direct investments only, an increase
from 20% in 2014 (Fig. 7.25); this is a
continuing trend witnessed over recent
years as these investors become more
experienced and accustomed to the
asset class. Despite this, public pension
funds continue to favour funds of funds
as a route to hedge fund exposure, with
51% gaining access to the asset class
solely through multi-manager products.
Fund of hedge funds managers have
responded to the changing needs of
their largest clients over recent years
by offering new products, customized
solutions and access to niche strategies
or managers.
In contrast to their private sector
counterparts, public pension funds seek
lower annualized returns for 2015 (+5.5%)
compared with private sector pension
funds’ 6.2% (Fig. 7.23). However, this
represents a small increase from 2014
when public pension schemes sought
annualized returns of 5.4% from their
hedge fund investments.
Key Facts: Public Pension Funds
420
Number of public pension funds
actively investing in hedge funds.
90
56%
Proportion of public pension funds
tracked by Preqin that invest in
hedge funds.
$22.2bn
Amount invested in hedge funds by
the most prominent public pension
fund investor, ABP (managed by
APG - All Pensions Group).
Bridgewater Associates – hedge
fund manager most invested with
by public pension funds.
© 2016 Preqin Ltd. / www.preqin.com
The 2016 Preqin Global Hedge Fund Report - Sample Pages
11. Managed Accounts
Managed Accounts
- Introduction
years. These structures are accompanied
by higher barriers to entry, in terms of
minimum investment size, and are often
of most interest to the largest and most
sophisticated institutional investors; 58%
of institutional investors that invest in
managed accounts have $1bn or more
in assets under management (AUM).
As a result, those fund managers that
The hedge fund sector has seen many
changes in recent years, as fund
managers respond to a growing audience
for their strategies and the challenges that
come with a growing institutional capital
base. As a result of increased interest in
the transparency, liquidity and control of
assets, we have seen managed account
structures rise to prominence in recent
can arrange managed accounts for their
investors may gain access to these longterm investment partners.
In this section, we take a closer look at
the managed account universe, which
types of investors use this structure and
which types of managers offer these
products.
Investor Interest in Managed Accounts
38%
of investors allocate to
or consider investment
in hedge funds through
separately managed
accounts.
65%
of investors’ consultants
recommend investment
in hedge funds through
separately managed
accounts.
24%
of investors allocate to
or consider investment in
hedge fund managed
accounts through
platforms.
48%
of investors’ consultants
recommend investment
in hedge fund managed
accounts through
platforms.
Five Leading Investor Types that Currently Use Managed Accounts*
$
42%
of Sovereign Wealth
Funds
30%
of Funds of Hedge
Funds
21%
15%
of Banks
of Public Pension
Funds
11%
of Asset Managers
*Proportion of each group that invest through managed accounts.
Characteristics of Managed Accounts vs. Commingled Hedge Funds
Managed Accounts
$4.4mn
Commingled Hedge Funds
$2.0mn
Mean Minimum Investment Size
7.3
Months
2.7
Months
Mean Lock-up Period
1.58%
1.46%
Mean Management Fee
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