Hedge fund and hedge funds-of-funds businesses are accounting for a more meaningful piece of the total assets managed by some of the largest multiasset money managers as well as their balance sheets.
“The message has finally sunk in: Big, traditional asset managers are not going to be able to survive without finding more lucrative sources of revenue,” said Daniel Celeghin, a partner at management consultant Casey, Quirk & Associates LLC, Darien, Conn.
The shift of giant, broadly diversified money management companies toward higher fee alternative investments — and away from low fee, increasingly commoditized passive and enhanced strategies and active long-only equity and fixed-income approaches — is picking up speed. At the end of September 2004, the last time Pensions & Investments analyzed the alternatives managed by big money managers, hedge fund and hedge funds-of-funds assets were significantly smaller for most companies (P&I, Oct. 18, 2004).
A review of P&I's ranking of the 50 largest money managers with significant U.S. investment businesses by their worldwide assets under management found that 30 companies managed hedge funds and funds of funds totaling an aggregate $300.9 billion. Thirteen managed in excess of $5 billion each in hedge funds and funds of funds and nine manage more than $11 billion each.
The top multiasset managers ranked by worldwide hedge fund and funds-of-funds assets managed as of June 30 were:
- BlackRock Inc., $42.7 billion;
- J.P. Morgan Asset Management, $38.4 billion;
- Credit Suisse Asset Management, $37.7 billion; and
- Goldman Sachs Asset Management, $37.7 billion.
For a comparatively small money manager, hedge funds and funds of funds represented nearly 10% of Credit Suisse's $380.9 billion of worldwide assets under management as of June 30, the highest proportion in P&I's universe. That's a big jump from the 2.6% of assets CSAM managed in hedge funds and funds of funds at the end of September 2004. The total of CSAM's combined hedge funds and funds of funds grew 329% from $8.8 billion at the end of the third quarter of 2004.
Ranked by the percentage of total assets managed in hedge funds/funds of funds, the other top firms were:
- UBS Global Asset Management, 5.3%;
- Goldman Sachs, 4.5%; and
- Morgan Stanley Investment Management, 3.8%.