Hedge fund assets rise, but some managers are getting more
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September 21, 2015 01:00 AM

Hedge fund assets rise, but some managers are getting more

Christine Williamson
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    Doug Goodman
    Towers Watson consultant Douglas A. Smith said it's 'hard to justify' the extra layer of fees being paid by institutional investors to hedge funds-of-funds managers.

    The majority of hedge fund and hedge funds-of-funds managers saw an increase in their assets in the year ended June 30, but there was wide dispersion between the best and worst firms and between hedge fund and hedge funds-of-funds managers.

    Significantly more hedge fund managers — 70% — reported their assets managed worldwide grew in a year-to-year comparison than did hedge funds-of-funds managers, data from Pensions & Investments' annual survey showed. By contrast, only 55% of hedge funds-of-funds managers said their assets rose during the year ended June 30.

    Assets managed worldwide by the 128 institutionally oriented, single and multistrategy hedge fund managers that participated in Pensions & Investments' annual survey totaled $1.35 trillion as of June 30. Assets of the 25 largest hedge fund managers in the P&I universe totaled $730.5 billion, about 54% of total assets of those surveyed.

    A comparison to P&I's 2014 and earlier hedge fund special report totals is not possible because of a change in methodology, which ranked companies that responded to P&I's survey separately from companies for which data was taken from Securities and Exchange Commission Investment Advisor Disclosure Form ADVs.

    The largest managers of hedge funds

    Ranked by discretionary assets managed in hedge funds worldwide, in millions, as of June 30, 2015. For a printable list, click here.

    RankManagerAssets

    1Bridgewater Associates$103,623
    2AQR Capital Mgmt.$45,600
    3Man Group$44,400
    4Och-Ziff Capital Mgmt.$37,929
    5BlackRock$33,388
    6Millennium Mgmt.*$30,400
    7Winton Capital Mgmt.$29,784
    8J.P. Morgan Asset Mgmt.$28,442
    9Brevan Howard Asset Mgmt.$27,000
    10Renaissance Technologies$27,000
    11Elliott Management$26,800
    12D.E. Shaw Group $26,369
    13Davidson Kempner Capital Mgmt.$25,600
    14Citadel$24,900
    15Viking Global Investors$21,832
    16Two Sigma Investments$21,700
    17York Capital Management$21,700
    18King Street Capital Mgmt.$21,100
    19Farallon Capital Mgmt.$20,600
    20Marshall Wace$20,300
    21Appaloosa Mgmt.$20,000
    22Pershing Square Capital Mgmt.$18,531
    23Paulson & Co.$18,299
    24Third Point $17,800
    25Canyon Partners*$17,400
    26Anchorage Capital$15,800
    27Pacific Investment Mgmt.$15,674
    28Moore Capital$15,500
    29Goldman Sachs Asset Mgmt.$15,200
    30BlueMountain Capital Mgmt.$14,953
    31CQS$14,438
    32Cevian Capital$14,312
    33Magnetar Capital$14,300
    34MSD Capital$14,100
    35Fortress Investment Group$13,621
    36Tudor Investment$13,400
    37Fir Tree Partners$13,077
    38Lone Pine Capital$12,900
    39Highfields Capital Mgmt.$12,400
    40Capula Investment Mgmt.$12,200
    41JANA Partners$11,810
    42Greenlight Capital$11,800
    43Glenview Capital Mgmt.$11,770
    44Avenue Capital Mgmt.$11,644
    45GoldenTree Asset Mgmt.$11,305
    46The Children's Investment Fund$11,000
    47Trian Fund Mgmt.$10,600
    48PointState Capital$10,500
    49Graham Capital Mgmt.$9,943
    50Carlson Capital$9,800
    51Marathon Asset Mgmt.$9,700
    52Pine River Capital Mgmt.$9,500
    53Nephila Capital$9,385
    54Ramius$9,201
    55Senator Investment Group$9,040
    56Eton Park$9,000
    57BlueCrest Capital$8,986
    58MKP Capital Mgmt.$8,375
    59Taconic Capital Advisors$8,327
    60Maverick Capital$8,040
    61Blue Ridge Capital$8,000
    62Silver Point Capital$7,700
    63Visium Asset Mgmt.$7,300
    64Eminence Capital$6,400
    65Scopia Capital$5,700
    66UBS O'Connor$5,600
    67Ellington Mgmt. Group$5,500
    68Samlyn Capital$5,500
    69DW Partners$5,200
    70Solus Alternative Asset Mgmt.$5,174
    71Black River Asset Mgmt.$5,169
    72Halcyon Asst Mgmt.$4,900
    73Aurelius Capital Mgmt.*$4,754
    74Strategic Value Partners*$4,400
    75Salient Partners$4,203
    76Claren Road Asset Mgmt.$4,200
    77Waterfall Asset Mgmt.$4,186
    78Hutchin Hill Capital$4,100
    79Tricadia Capital Mgmt.$4,100
    80Passport Capital$3,800
    81Tilden Park Capital Mgmt.$3,730
    82Autonomy Capital$3,600
    83Blue Harbor Group$3,580
    84Contrarian Capital Mgmt.$3,500
    85Capstone Investment Advisors$3,413
    86Hoplite Capital Mgmt.$3,300
    87Hudson Bay Capital Mgmt.$3,263
    88Gramercy Funds Mgmt.$3,249
    89Paloma Partners$3,200
    90LibreMax Capital$3,100
    91Marcato Capital$3,100
    92Ivory Asset Mgmt.$3,021
    93Varde Partners$2,855
    94Impala Asset Mgmt.$2,786
    95Hitchwood Capital Mgmt.$2,755
    96Highline Capital Mgmt.$2,693
    97Kingdon Capital Mgmt.$2,674
    98Structured Portfolio Mgmt.$2,668
    99Ionic Capital Mgmt.$2,500
    100New Mountain Vantage Advisors$2,500
    101Finisterre Capital$2,411
    102Conatus Capital Mgmt.$2,296
    103HG Vora$2,100
    104Kepos Capital$2,089
    105Wexford Capital$2,000
    106Seer Capital Mgmt.$1,940
    107Napier Park Global Capital$1,920
    108Tremblant Capital Group$1,830
    109Three Bays Capital$1,800
    110Greywolf Capital Mgmt.$1,761
    111Tetragon Financial Grp. Asset Mgmt.$1,528
    112Saba Capital$1,500
    113Brenner West Capital Partners$1,446
    114400 Capital Mgmt.$1,445
    115Perella Weinberg Partners$1,438
    116P. Schoenfeld Asset Mgmt.$1,400
    117Prologue Capital Mgmt.$1,240
    118Highland Capital Mgmt.$1,203
    119Folger Hill$1,200
    120MAST Capital Mgmt.$1,108
    121Neuberger Berman$1,067
    122White Elm Capital$1,061
    123Wingspan Investment Mgmt.$1,007
    124Omni Partners$970
    125Tide Point Capital Mgmt.$800
    126Birch Grove Capital$700
    127CCI Healthcare$624
    128Latigo Partners$431

    *Data are as of July 1, 2015.

    Source: P&I survey

    P&I's 2015 hedge fund ranking is based on net discretionary assets managed in hedge funds worldwide. No changes were made to the hedge funds-of-funds manager rankings because all but one manager — Aurora Investment Management LLC — returned this year's survey.

    Institutional investors continue to favor large, institutional hedge fund managers, said Peter Laurelli, a New York-based vice president and head of research for industry performance database provider eVestment LLC.

    “A lot of money went into big multistrategy hedge funds and global macro/managed futures funds throughout the first half of 2015,” Mr. Laurelli said.

    For example, according to survey data provided in both 2015 and 2014, multistrategy manager Millennium Management LLC moved up to sixth place from 16th with growth of 31.3% to $30.4 billion, and managed futures specialist Winton Capital Management Ltd. was pushed up to the seventh spot from 13th with growth of 21.3% to $29.8 billion.

    Assets managed in hedge funds-of-funds worldwide as of June 30 totaled $441.2 billion, up 0.2% from the prior year. Assets managed by the 25 largest funds-of-funds managers rose 4.7% to $381.1 billion, or 86.4% of the total.

    Institutional investors' collective evolution to direct investments in hedge funds has continued to be a drain on hedge funds-of-funds assets, P&I data show.

    In the approximately seven years since the financial crisis, hedge funds-of-funds assets managed worldwide have declined 37% from the universe's peak of $699.9 billion as of June 30, 2008, P&I's historic survey data showed.

    The largest managers of hedge funds-of-funds

    Ranked by discretionary assets managed in hedge funds-of-funds worldwide, in millions, as of June 30, 2015. For a printable list, click here.

    RankManagerAssets

    1Blackstone Alternative Asset Mgmt.$67,260
    2UBS Hedge Fund Solutions$34,516
    3Goldman Sachs Asset Mgmt.$29,248
    4GCM Grosvenor$27,373
    5BlackRock$21,849
    6J.P. Morgan Asset Mgmt.$19,790
    7Permal Group$18,783
    8Mesirow Advanced Strategies$14,215
    9EnTrust Capital$12,462
    10Man Group$11,300
    11Aetos Alternatives Mgmt.$10,939
    12Rock Creek Group $10,900
    13KKR Prisma $10,500
    14Pacific Alt. Asset Mgmt.$9,640
    15AllianceBernstein$9,446
    16SkyBridge Capital II$9,417
    17K2 Advisors$9,387
    18Lighthouse Investment Partners$8,600
    19Aurora Investment Mgmt.*$7,700
    20Lyxor Asset Mgmt.$7,700
    21Towers Watson$6,450
    22Strategic Inv. Group$6,417
    23SEI Investments Mgmt.$5,900
    24Crestline Investors$5,750
    25Evanston Capital Mgmt.$5,539
    26Arden Asset Mgmt.$5,478
    27Silver Creek Capital Mgmt.$5,139
    28Corbin Capital Partners$5,026
    29GAM$4,900
    30Amundi Alternative Investments$4,796
    31Mercer$4,774
    32Magnitude Capital$3,729
    33Private Advisers$3,705
    34Neuberger Berman$3,470
    35BNY Mellon$3,449
    36Pinnacle Asset Mgmt.$2,120
    37Diversified Global Asset Mgmt. $2,084
    38Commonfund$1,909
    39Investcorp$1,875
    40Maverick Capital$1,840
    41Russell Investments$1,565
    4250 South Capital Advisors$1,302
    43Berens Capital Mgmt.$1,072
    44Larch Lane Advisors$777
    45Meridian Capital Partners$580
    46SSARIS$526

    *Net discretionary assets are as of Mar. 31, 2015, from SEC ADV filing.

    Source: P&I survey, unless noted

    “Many investors are skeptical of hedge funds-of-funds,” said Douglas A. Smith, senior investment consultant, hedge fund manager research, who is based in the New York office of Towers Watson & Co.

    Mr. Smith noted that “in a low-return environment, it's hard to justify hedge funds-of-funds fees on top of paying fees for the underlying hedge fund managers.”

    Those investors who are allocating to hedge funds of funds are creating a definitive “bifurcation between winners and losers,” Mr. Smith said, evidenced by how much of the industry is run by the largest managers.

    Narrowing the focus to the 98 institutionally oriented, single and multistrategy hedge fund managers that participated in P&I's annual survey this year and last, more than half of the 69 firms that experienced asset growth for the year ended June 30, or 55%, saw increases of at least 15%. Of the 28 hedge fund managers in P&I's universe that reported a decline in their assets for the 12-month period, 25% experienced declines of 15% or more.

    Range of growth rates

    Firms managing hedge funds reported to P&I a very broad range of growth rates in the year ended June 30 from 86.9% to -70%.

    Some of the fastest-growing hedge fund firms were near the smaller end of P&I's ranking of managers by assets under management, including 400 Capital Management LLC, with asset growth of 86.9% to $1.4 billion; Neuberger Berman LLC, also with growth of 86.9% to $1.1 billion; Tilden Park Capital Management LP, up 85.7% to $3.7 billion; Waterfall Asset Management LLC, up 82% to $4.2 billion; and Hutchin Hill Capital LP, up 78.3% to $4.1 billion.

    Exhibiting a more modest growth rate for the year ended June 30, Bridgewater Associates LP retained the No. 1 position by worldwide hedge fund assets under management in P&I's ranking with a gain of 13.6% to $103.6 billion. AQR Capital Management LLC grew by 44.3% to $45.6 billion, popping the firm up to the second spot from sixth in the prior year. AQR displaced Man Group which dropped to third place with $44.4 billion, up 6.5% from the prior year.

    Two Sigma Investments LLC jumped into the ranks of the 25 largest hedge fund firms for the first time in 2015, experiencing the highest growth rate among the big managers for the year ended June 30 — 59.6% — to $21.7 billion.

    Other new entrants to the P&I top 25 list were Pershing Square Capital Management LP, which rose to 22nd place from 27th with assets up 21.8% to $18.5 billion (2014 assets were from the firm's ADV), and Third Point LLC, up 20.3% to $17.8 billion and the 24th spot from the 34th the prior year.

    Paulson & Co. Inc. was the only manager on P&I's 2015 top 25 hedge fund manager list to experience a significant decline in assets — 20% to $18.3 billion — that was performance-related. Paulson & Co. dropped to the 23rd place from 17th as a result.

    Brevan Howard Asset Management LLP experienced a 25% decline in assets to $27 billion related to the spinout of DW Partners LP in January, moving the firm down to ninth place from third.

    BlueCrest Capital Management (UK) LLP had a 70% reduction in assets to $9 billion after spinning out Systematica Investments Ltd. in January, dropping the firm to 57th place from seventh.

    Baupost Group LLC was moved out of P&I's traditional ranking, where it ranked eighth based on its ADV assets of $29.9 billion as of Dec. 31, 2013.

    Lone Pine Capital LLC moved down to the 38th position after reporting net discretionary assets of $12.9 billion to P&I.

    In 2014, Lone Pine occupied the ninth place in P&I's ranking based on the Dec. 31, 2013, regulatory assets of $27.2 billion the firm provided in its SEC ADV filing for that year.

    The difference in the size of Lone Pine's regulatory vs. its net discretionary assets is one example of the lack of clarity inherent in trying to compare money managers' assets as reported on the SEC's ADV form.

    Mining SEC forms

    The SEC allows managers latitude in how they report their assets on the Investment Adviser Disclosure ADV form. Many companies report only regulatory assets under management in their ADV Part 5 and Part 2A, which may include undisclosed leverage on hedge funds assets and non-hedge fund strategies.

    It was because of an increase in the inconsistency with which hedge fund managers report their data to the SEC that P&I changed the way it has ranked institutionally focused hedge funds for the last five years. There now are two rankings: one for managers that provided company information in P&I's annual survey and one for those firms that did not cooperate and for which asset data were culled from SEC ADV forms.

    In 2015, 128 managers, including 24 new to P&I's rankings, returned surveys. Data from ADV filings was collected for 42 hedge fund managers.

    The three largest hedge fund managers ranked by regulatory assets from their respective ADV filings were:

    • Tiger Global Management LLC with reported regulatory and regulatory discretionary assets of $35 billion (ADV Part 5) and discretionary assets of $25.6 billion (ADV Part 2A) as of Jan. 1;

    • GSO Capital Partners LP with reported regulatory assets of $33.2 billion and regulatory discretionary assets of $27.7 billion (ADV Part 5) as well as discretionary assets of $27.7 billion (ADV Part 2A) as of Dec. 31;

    • Lansdowne Partners (UK) LLP with reported regulatory and regulatory discretionary assets of $32.4 billion (ADV Part 5) and discretionary assets of $17.2 billion (ADV Part 2A) as of Dec. 31.

    The largest managers of hedge funds ranked by regulatory assets

    Based on SEC ADV filings, in millions, as of Dec. 31, 2014. For a printable list, click here.

     ADV Part 5ADV Part 2A
     Regulatory assetsDiscretionary assets
    RankManagerTotalDiscretionaryTotalNet

    1Tiger Global Mgmt.1$35,019$35,019$25,615
    2GSO Capital Partners$33,200$27,700$27,700
    3Lansdowne Partners (UK)$32,401$32,401$17,212
    4Baupost Group $31,729$31,729$31,729
    5Discovery Capital Mgmt.$31,583$31,583$31,583
    6Brigade Capital Mgmt.$19,604$19,604$19,604
    7ValueAct Capital Mgmt.2$19,423$19,423$19,423
    8Gotham Asset Mgmt.$17,665$17,665$17,665
    9Coatue Mgmt.$17,009$17,009$9,423
    10Odey Asset Mgmt.3$15,994$15,994$12,600$4,400
    11Polar Capital4$12,784$12,784$12,260
    12Oxford Asset Mgmt.4$12,600$12,600$4,400
    13Cheyne Capital Mgmt.5$11,780$11,780$11,780
    14Omega Advisors $11,208$11,208$11,208
    15Caxton Associates$11,166$11,166$11,166
    16Baker Brothers Investments $10,993$10,933$10,993
    17Mason Capital Mgmt.$10,074$10,074$12,710
    18Whitebox Advisors$8,430$8,430$8,430
    19Black Diamond Capital Mgmt. $8,299$8,299$8,299
    20Indus Capital Partners$7,830$7,830$6,989
    21Emerging Sovereign Group$7,375$7,375$7,375
    22PDT Partners$6,767$6,767$6,767
    23QVT Financial4$6,259$6,259$3,461
    24Partner Fund Management6$5,435$5,435$5,435$2,910
    25Premium Point Investments$5,336$5,336$1,502
    26TIG Advisors$4,862$4,862$2,910
    27Starboard Value$4,692$4,692$3,700
    28Achievement Asset Mgmt.2$4,595$4,595$1,406
    29Astenbeck Capital Mgmt. $3,168$3,168$1,618$1,777
    30Litespeed Mgmt.7$2,674$2,674$2,674
    31HealthCor Mgmt.$2,646$2,646$1,777
    32Atlantic Investment Mgmt.8$2,314$2,314$2,100
    33Providence Investment Mgmt.8$2,286$2,286$913
    34Serengeti Asset Mgmt.2$2,124$2,124$2,124
    35Finepoint Capital$2,113$2,113$2,113
    36Columbus Hill Capital Mgmt.1$1,849$1,849$1,666
    37Quantitative Investment Mgmt.$1,630$1,630$518
    38Sandell Asset Mgmt.$1,185$1,185$1,185
    39Watershed Asset Mgmt.$1,176$1,176$1,176
    40Czech Asset Mgmt.$1,099$1,099$2,528
    41Armored Wolf $655$575$453
    42Ospraie Mgmt.$596$596$207

    Notes:

    1 data as of Jan. 1, 2015;

    2 data as of April 1, 2015;

    3 data as of June 30, 2015;

    4 data as of March 31, 2015;

    5 data as of April 30, 2015;

    6 data as of Jan. 31 ,2015;

    7 data as of July 31, 2015;

    8 data as of Feb. 28, 2015.

    Source: SEC ADV Investment Advisor Disclosure filings. ADV Part 5 provides information about the money manager, including regulatory assets, which may include leverage on hedge funds assets and non-hedge fund strategies. ADV Part 2A includes more detailed information about the firm, its strategies, fees, legal structure and assets under management. Managers are permitted to provide regulatory assets or assets under management, not including leverage in its "brochure" in Part 2A. Managers are not required to provide net assets under management.

    Hedge fund managers turned in “a mixed bag of returns. There really weren't any remarkable outliers,” said Kenneth J. Heinz, president of data provider Hedge Fund Research Inc., Chicago, noting much of the year ended June 30 was “a repeat of the past five years of bull equity markets.”

    The 2.3% return of the HFRI Hedge Fund Weighted Composite index for the year ended June 30 doesn't reflect the dispersion within his mixed bag of returns, Mr. Heinz said, noting that the hedge fund industry hit a new peak of $2.9 trillion in assets under management as of June 30 through a combination of fairly good performance overall and strong net inflows.

    The return of the HFRI Fund of Funds Composite index of 3.96% for the year ended June 30 was a notable 163 basis points higher than HFR's broadest hedge fund index.

    Hedge Fund Research produces the HFRI indexes.

    By comparison, for the year ended June 30, returns for major market indexes were Standard & Poor's, 7.4%; MSCI ex-U.S., 6.9% (local currency); MSCI Emerging Markets, 3.6% (local currency); and Barclays U.S. Aggregate Bond, 1.9%.

    Phenomenon stays true

    The phenomenon of a few small companies exhibiting higher growth in assets managed worldwide in the year ended June 30 than much larger peers also was true for P&I's hedge funds-of-funds universe.

    Neuberger Berman led P&I's hedge funds-of-funds manager universe in terms of asset growth, up 50.9% to $3.5 billion, followed by Russell Investments which rose 22.8% to $1.6 billion over the one-year period ended June 30. SkyBridge Capital II LLC, which ranked near the bottom of P&I's 2014 largest hedge funds of funds at 21st place was bumped up closer to the middle of the pack to the 16th spot with growth of 22.4% to $9.4 billion.

    As in 2014, the top three positions based on assets under management on the 2015 P&I hedge funds-of-funds table continued to be held by the same three mega managers: Blackstone Alternative Asset Management remained firmly in first place with $67.3 billion on growth of 12.8% in the year ended June 30. In second place, managing just over half the amount of hedge funds of funds that Blackstone did was UBS Hedge Fund Solutions with $34.5 billion, up 11.7% over the previous year. Goldman Sachs Asset Management again ranked third with $29.2 billion on growth of 5.9% over the year.

    Managers among the 25 largest hedge funds-of-funds companies that experienced the worst asset declines were Lyxor Asset Management, which dropped 18.9% to $7.7 billion over the year ended June 30, and Aurora Investment Management.

    Aurora declined to respond to P&I's request for information. The firm's most recent ADV said net discretionary assets as of March 31 were $7.7 billion, down 15.5% compared with the June 30, 2014, data the firm provided for the prior year's survey.

    Of the 19 hedge funds-of-funds managers in the survey universe that reported asset declines in the year ended June 30, 50 South Capital Advisors LLC (formerly a unit of Northern Trust Asset Management) experienced the largest fall — 39.8% — to $1.3 billion.

    Sharp declines also were suffered by Investcorp Investment Advisers LLC, down 32.5% to $1.9 billion; Mercer Investment Management Inc., down 27.1% to $4.8 billion; and Amundi Alternative Investments, down 26.2% to $4.8 billion.

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