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 Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

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

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

Industry Profile Excerpts

Industry Overview

The 3,600 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 15,000 active funds that hold over $4.5 trillion in assets under managements (AUM).

    • The North American hedge fund industry accounts for nearly 70% of global AUM, according to Pensions & Investments. The US is home to over 3,600 registered hedge funds, according to Zippia, and the top 15 have almost $600 billion in AUM.
    • The industry is concentrated with the 50 largest firms accounting for 55% of industry revenue.
    • The US is home to 693 $1 billion+ hedge funds and accounts for 56% of global funds valued at $1 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 2022 survey by the Alternative Investment Management Association, small hedge fund firms can break even managing $64 million in assets, down from the 2017 break-even point of $86 million in assets, while two-thirds of investors will consider allocating to hedge funds with less than $100 million in assets under management.
                                    Industry Forecast
                                    Hedge Fund Managers Industry Growth
                                    Source: Vertical IQ and Inforum

                                    Recent Developments

                                    Sep 12, 2023 - Hedge Funds Increase Fees Slightly
                                    • Hedge fund managers slightly increased their prices in the first half of 2023. Industry employment increased and wages for nonsupervisory employees increased slightly during the period.
                                    • It's not easy to find portfolio managers simply because so few people have the psychological stamina to do the job, according to Will England, CEO and Co-CIO of Walleye Capital. "There is a finite pool of talent," said England. "The job of being a PM, whether you're quantitative or fundamental, is psychologically extremely toxic because you're going to be wrong basically just as much as you're going to be right. You're going to get kicked in the face a lot, and you're going to be someone who's the smartest person that they've known their entire life, and then they're just going to get beat up all the time." Toxic portfolio manager jobs in hedge funds are not an anomaly, said England: they are "what the job is." Becoming a top performing portfolio manager "takes a certain psychological profile and that requires training, and I just don't think many humans are wired that way," he added.
                                    • About 900 new hedge funds were launched in 2022, the lowest number since 2010, according to quant technology provider SigTech. "One possible explanation for this fall is found in the continued rise of large multi strategy funds. These funds are in high demand by institutional investors and have also become an attractive alternative for portfolio managers wanting to strike out on their own," said Daniel Leveau, SigTech’s VP of Investor Solutions. Equity long/short remains the largest hedge fund category (26.9%). Cryptocurrency was the second most popular category for fund launches with 121 new funds (13.4%). Delaware (36%) and the Cayman Islands (31%) continues to be the preferred legal jurisdiction for hedge funds. The US dominates the industry with a market share of 65%, followed by the UK (8.8%) and Hong Kong (3.5%).
                                    • Event-driven hedge funds, including those that bet on company mergers or restructurings, and relative value funds, which trade on asset price dislocations, ended 2022 with losses of 5.04% and 0.9%, respectively. Crypto hedge funds tanked 55.08% after posting positive returns in only three months of the year. Despite their massive losses, crypto hedge funds account for a tiny part of the industry's $3.8 trillion in assets.
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