Hedge Fund Managers

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 3,300 hedge fund managers in the US manage investment vehicles that use alternative investment strategies, including hedging against market downturns, investing in asset classes such as currencies or distressed securities, and utilizing return-enhancing tools such as leverage, derivatives, and arbitrage.

Dependence on Large Investors

Hedge funds depend on institutional investors and high net worth individuals to provide capital for investment.

Competition from Alternative Investment Vehicles

Hedge funds compete with a variety of providers of alternative investment vehicles, including investment management firms, mutual funds, insurance companies, banks, brokerage firms, private equity, and other financial institutions.

Industry size & Structure

The global hedge fund industry includes approximately 18,300 active funds that hold over $4.1 trillion in assets under managements (AUM).

    • The North American hedge fund industry accounts for nearly 79% of global AUM, according to Preqin. The US is home to 3,300 of the 5,380 active hedge fund managers tracked by Preqin.
    • The industry is concentrated with the 50 largest firms accounting for 55% of industry revenue.
    • The US is home to 674 $1 billion+ hedge funds and accounts for 47% of global funds valued at $ billion+.
    • Large firms include Bridgewater Associates, AQR Capital Investment, and Sculptor Capital Management.
    • Large investment firms with hedge fund operations include BlackRock, Blackstone, and Oaktree Capital.
    • According to a survey by the Alternative Investment Management Association, small hedge fund firms can break even managing $86 million in assets, while one-third of profitable firms have less than $50 million in assets.
                                    Industry Forecast
                                    Hedge Fund Managers Industry Growth
                                    Source: Vertical IQ and Inforum

                                    Coronavirus Update

                                    Apr 27, 2022 - War-driven Commodities Price Surge Boosts Returns
                                    • Commodities-focused hedge funds are posting outsize returns from the biggest rally in decades following Russia’s invasion of Ukraine. Some funds reported gains of 30% in the first two months of 2022. The gains follow years of poor performance for some funds. Soroban Capital Partners LP, a $10 billion stock-picking hedge fund in New York, is one of the biggest winners, making at least several hundred million dollars on the trade since February, a person familiar with the matter said. Other winners include New York macro fund Castle Hook Partners and value investor Pilgrim Global. The bet was that a years-long drop in spending on new commodity supply and efforts to limit carbon emissions would push up materials prices and shares of producers, according to people familiar with the firms.
                                    • More hedge funds were launched in 2021 than in any 12 months since 2017, according to Hedge Fund Research (HFR). Hedge funds assets reached $4 trillion for the first time ever in December 2021, with returns of 10.2% for the year. HFR President Kenneth J Heinz said in a statement the industry is likely to attract investors through mid-2022 as macro strategies have helped to create returns despite high volatility this year.
                                    • Hedge fund performance bounced back in December after taking a hit in November as investors reacted to the emergence of the new Omicron variant, according to Hedge Fund Research (HFR). The HFRI Fund Weighted Composite Index (HFRI FWC), a global measure of about 1,400 single-manager hedge funds, rose 1.3% in December. The HFRI FWC grew 10.3% for the full year, lagging the 11.8% growth in 2020, but 2021 marked the third-highest annual gain since 2009. Equities-focused funds saw the most significant November drop on news of the Omicron variant. However, the HFRI Equity Hedge (Total) Index posted growth of 1.85% in December and saw a full-year return of 11.96%. The HFRI Event-Driven (Total) Index was up 1.8% in December and finished 2021 with a total gain of 13.1%. The HFRI Macro (Total) Index - which measures funds that wager on macroeconomic trends – rose 0.65% in December and increased 7.52% for the year. The HFRI Relative Value (Total) Index, which measures fixed-income strategies, saw 0.65% growth in December and a 7.65% increase for the year. HFR noted that hedge funds continue to expect pandemic-related volatility in 2022. Capital preservation strategies across equity, fixed-income, and commodity markets will also face challenges from rising interest rates and record inflation.
                                    • Portfolio managers purchased oil at the fastest rate in 14 months during the second full week of January, according to Reuters. The moves marked a reversal of the selloff at the end of November 2021, which occurred in response to news of the Omicron variant. Hedge funds and other money managers purchased the equivalent of about 83 million barrels of oil across the six most important petroleum-linked futures and options contracts during the week ending on January 11, according to Reuters. News of the Omicron variant initially sent oil prices lower, but they later recovered amid early evidence suggesting Omicron may cause milder symptoms than some previous variants.
                                    • Hedge fund and private equity fund insiders suggest that private debt will be a fast-growing asset class as the world economy continues to recover. Assets under management in private debt will see a compound annual growth rate of more than 11% over the next five years, growing from $848 billion to more than $1.4 trillion, according to Preqin. More than 80% of institutional investors have investments in private debt. Among those, more than 90% plan to maintain or increase their investments in 2022, according to a survey conducted by CoreData Research for Natixis Investment Managers in October and November of 2021.
                                    • Hedge fund managers are expected to embrace environment, social, and corporate governance (ESG) investment principles more thoroughly, according to Agecroft Partners. The COVID-19 pandemic shed a bright light on existing social and economic inequities, which is expected to drive more consideration of ESG issues. Pension funds, endowment foundations, and sovereign wealth funds account for nearly half of hedge fund industry assets, and they are increasingly demanding EGS principles from investments. Climate change awareness, in the form of renewable energy, is a key area of ESG investment focus. Investors are also demanding greater diversity both among the workforces of the companies they invest in and the workforces of fund managers.
                                    • Fund manager concerns about inflation appeared to ease amid hopes of a broader reopening of the global economy, according to Bank of America’s January Global Fund Manager Survey. More than half of managers expect inflation to be temporary. Just 6% said COVID-19 posed Wall Street’s most significant tail risk, and only 7% expect a recession. Fund managers felt the most significant tail risks to the global economy included hawkish central banking policy, inflation, and COVID-19-related asset bubbles. Bank of America also noted some shifting investment trends, including commodities over credit, banks over technology, and value stocks over growth stocks.
                                    • Nearly 80% of hedge funds said that they are adopting permanent hybrid working models due to the pandemic, according to a study published by the Alternative Investment Management Association and KPMG in December 2021. More than half said that team-building and maintaining company culture were the most significant challenges that arose from teleworking. About 30% said lack of real-time collaboration and decision-making posed the biggest obstacle. In terms of positive work-from-home experiences, about 60% of managers cited tech-enabled operational improvements. About half of managers said virtual work environments underscored the importance of embracing digital technology.
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