Cliffwater researchers estimated the average institutional portfolio directly invested in hedge funds returned 12% in the year ended June 30, with between four and five percentage points contributed by “healthy alpha,” Mr. Nesbitt said.
He noted there was “a lot of range in return” for institutional hedge fund portfolios in the period, likely the result of the degree of customization and the degree to which hedge fund beta is dialed up or down.
Portfolios with less beta exposure likely were nearer the low end of the performance range with returns between 6% and 10%, while portfolios with “higher-octane, higher-beta exposure” ended up toward the top, with returns between 14% and 16%, Mr. Nesbitt said.
The five largest companies retained their spots, in the same order, on P&I's hedge fund ranking for the second year in a row.
Bridgewater Associates LP remained the number one manager with assets of $81.9 billion as of June 30, up 8.8% from the prior year. Man Group PLC followed with $40.3 billion, down 2.7% from the previous year. The next three firms in rank order were Brevan Howard Asset Management LLP, $39.7 billion, up 8.3%; BlueCrest Capital Management LP, $36.7 billion, up 18.1%; and Och-Ziff Management LP, $36.7 billion, up 22.2%.
Within P&I's list of the 25 biggest managers of hedge funds, other firms with year-to-year growth over 20% were Credit Suisse Asset Management, up 30.5% with assets of $24.6 billion; Viking Global Investors LP, up 29.6% to $20.2 billion; The Baupost Group LLC, up 21.3% to $28.1 billion; and York Capital Management Global Advisors LLC, up 20% to $15 billion.
Two outliers in the top 25 list show higher growth rates, but that stems from reporting differences between 2012 and 2013: Canyon Capital Advisors LLC's assets, up 58% to $22.6 billion, and Pacific Investment Management Co.'s assets rose 52.5% to $15.4 billion.
The three biggest losers on P&I's top 25, with double-digit asset declines, were J.P. Morgan Asset Management where hedge fund assets dropped 23.6% to $22 billion; Paulson & Co. Inc., down 18.3% to $17.2 billion; and Winton Capital Management Ltd., down 15.5% to $24 billion.
For the 30 hedge fund managers that did not return P&I's survey, information about their net discretionary assets under management was gleaned from the brochure section of ADV forms filed with the Securities and Exchange Commission. (One caveat about using ADV information is that firms that predominantly manage hedge funds, especially credit specialists, may include non-hedge fund money within their net discretionary assets.)
Among the firms that responded fully to P&I's survey, just seven firms reported that they manage more than 90% of their hedge fund assets for pension funds, endowments, foundations, sovereign wealth funds and insurance companies.
Black River Asset Management LLC and Cheyne Capital International Ltd., which each manage 100% of their assets for institutions, top that list. Coincidentally, both managers ran $5.2 billion in hedge funds as of June 30.