Hedge funds have emerged from the recent financial crisis in much better health than most of their fund-of-funds brethren.
Thanks to the largesse of institutional investors, especially pension funds, assets of the 26 largest hedge funds grew a healthy 12.3% to $596.1 billion in the 18 months ended June 30.
In comparison, the 25 largest hedge fund-of-funds managers grew an aggregate 4.1% to $345.1 billion during the same period. Dec. 31, 2009, was the last time Pensions & Investments surveyed the biggest players in the hedge fund and fund-of-funds industry.
While positive in aggregate, assets of many of the 25 largest fund-of-funds managers remained negative three years after the financial crisis of 2008, according to analysis of P&I data.
P&I surveyed the largest hedge fund firms about their worldwide assets as of June 30 and the proportion that came from institutional investors. For firms that did not respond to the survey, information about their hedge fund and funds-of-funds assets was gleaned from ADV forms filed with the Securities and Exchange Commission and reliable press reports.
The top three hedge fund managers as of June 30 were Bridgewater Associates LP with $58.9 billion; Man Group PLC, with $39.3 billion; and Paulson & Co. Inc., with $35.2 billion.
The top funds of funds in terms of assets were Blackstone Alternative Asset Management with $37.2 billion; UBS Global Asset Management Alternative and Quantitative Investments, with $30.8 billion; and Grosvenor Capital Management LP, with $24.1 billion. (Grosvenor did not participate in P&I's survey, so its assets were obtained from the Securities and Exchange Commission's Form ADV, dated March 30.
Sources said assets of hedge fund and fund-of-funds managers were greatly buoyed by inflows from institutional investors — and those flows show no signs of abating.
“Despite the market turmoil since 2008, demand for hedge fund investment continues to grow, especially in the last six months, but definitely across the entire 18-month period,” said Donald A. Steinbrugge, managing partner at Agecroft Partners LLC, Richmond, Va., in an interview. Agecroft is a hedge fund consultant and third-party marketer.
“What is really surprising about both the hedge fund and funds-of-funds rankings is just how much of the assets of these firms are coming from institutional investors,” he added.
Hedge funds of funds were more inclined to share the makeup of their client base, with 21 of the 25 largest funds-of-funds managers providing the percentage of total assets coming from institutional clients. Only 11 of the largest hedge funds shared that information.
On average, 81% of hedge fund-of-funds managers' assets were managed for institutions worldwide as of June 30, compared with an average of 64% for hedge fund managers among those firms that provided a breakdown for P&I's survey, according to analysis of the data.