hedge fundspotlight - preqin · fig. 1: performance of first-time funds vs. all hedge funds (as at...

FEATURE Emerging Hedge Funds: Can They Outperform?

2

FEATUREHedge Funds and Brexit: One Year On

6

INDUSTRY NEWS 9

THE FACTS■ Performance

Benchmarks■ Activist Fund

Performance■ California-Based

Hedge Fund Investors■ UCITS Hedge Funds■ Fund Searches and

Mandates

10

11

12

1517

CONFERENCES 18

EMERGING HEDGE FUNDS: CAN THEY OUTPERFORM?

14.10% 14.10%First-time funds with a track record of three years or less have made gains of 14.10% over the past 12 months. How does this compare to the wider hedge fund industry and what appetite do investors have for emerging hedge funds?

Find out more on page 2

HEDGE FUND

SPOTLIGHTVOLUME 9, ISSUE 5 ■ June 2017

alternative assets. intelligent data.

HEDGE FUNDS AND BREXIT: ONE YEAR ON

One year ago, two days before the UK EU referendum, Preqin released a report looking at the views of hedge fund managers on this important vote. Here, we look at how Brexit is impacting hedge fund managers one year on from the referendum.

Find out more on page 6

All data in this newsletter can be downloaded to Excel for free

SIGN UP

Sign up to Spotlight, our free monthly newsletter, providing insights into performance, investors, deals and

fundraising, powered by Preqin data:

Alt Credit Intelligence European and US Fund Services Awards: Best Data and Information Provider | Africa Global Funds Awards 2016: Best Research and Data Provider | The Queen’s

Award for Enterprise: International Trade | HedgeWeek Global Awards: Best Global Hedge Fund Research Provider | CAIA Corporate Recognition Award

www.preqin.com/contact [email protected]|

IN THIS ISSUE

JUST RELEASED: PREQIN SPECIAL REPORT:HEDGE FUNDS IN EUROPE

Download Your Copy

PREQIN SPECIAL REPORT:

HEDGE FUNDS IN EUROPE

JUNE 2017


www.preqin.com/contact

mailto:[email protected]

www.google.com/+Preqin

https://www.linkedin.com/company/147822?trk=cws-btn-overview-0-0

https://twitter.com/intent/follow?original_referer=https%3A%2F%2Fabout.twitter.com%2Fresources%2Fbuttons&ref_src=twsrc%5Etfw&region=follow_link&screen_name=Preqin&tw_p=followbutton

www.preqin.com/signup

https://www.preqin.com/docs/reports/Preqin-Special-Report-Hedge-Funds-in-Europe-June-2017.pdf

https://www.preqin.com/docs/reports/Preqin-Special-Report-Hedge-Funds-in-Europe-June-2017.pdf

www.preqin.com/about

https://www.preqin.com/go.aspx?lid=22617


© Preqin Ltd. 2017 / www.preqin.com2 Hedge Fund Spotlight | June 2017

EMERGING HEDGE FUNDS: CAN THEY OUTPERFORM? We take a look at the hedge fund industry’s emerging managers, defined as small or young funds, to evaluate their performance, the strategies employed, terms and conditions and investors in these funds.

Emerging managers are an important part of the hedge fund landscape,

with investors drawn by their potential to offer higher returns among other reasons. However, the definition of an emerging manager will vary from investor to investor; what a large pension fund will consider as an emerging fund may differ from a small family office, for instance.

In this article, we examine two ways to group or define emerging hedge funds to assess whether these funds do outperform their established counterparts, what appetite there is from investors and what options there are for investors looking to allocate capital to emerging managers. The criteria we evaluate emerging managers against are:

■ First-time funds (FTFs) with assets under management (AUM) of $300mn or less;

■ First-time funds with a track record of three years or less.

YOUNG FUNDS OUTPERFORM SMALL FUNDSEmerging hedge funds may be more prone to failure, either due to their strategies being untested through market cycles

or as a result of their small size making them more vulnerable to capital losses. Therefore, investors expect emerging manager hedge funds to generate strong returns in order to compensate for the higher risk that can be associated with investing in them. Funds with a track record of three years or less, and funds with $300mn or less in AUM, outperform the wider hedge fund industry over a 12-month, three-year and five-year timeframe (Fig. 1). Funds that have a track

record of three years or less produce significantly better returns than both funds with $300mn or less in AUM, and the wider hedge fund industry, delivering a five-year annualized return of 12.22% compared to 8.98% for small first-time funds. Some funds have returned significantly more than this; for example, Volpoint Fund, LP was launched in January 2016, and in the 12 months to May 2017 has returned 107.31%.

11.91%

5.97%

8.98%

4.78% 4.47%

0.83

1.56

14.10%

8.52%

12.22%

4.03% 4.07%

1.622.51

10.22%

5.31%

7.71%

3.98% 3.70%

0.83

1.54

0%

2%

4%

6%

8%

10%

12%

14%

16%

12 Months 3-YearAnnualized

Return

5-YearAnnualized

Return

3-YearVolatility

5-YearVolatility

3-YearSharpeRatio

5-YearSharpeRatio

FTFs with ≤$300mn in AUM FTFs with Track Record of ≤3 Years All Hedge Funds

Source: Preqin Hedge Fund Online

Net

Ret

urn

Fig. 1: Performance of First-Time Funds vs. All Hedge Funds (As at May 2017)

-5%

0%

5%

10%

15%

20%

25%

Jan-

12

May

-12

Sep-

12

Jan-

13

May

-13

Sep-

13

Jan-

14

May

-14

Sep-

14

Jan-

15

May

-15

Sep-

15

Jan-

16

May

-16

Sep-

16

Jan-

17

May

-17

FTFs with ≤$300mn in AUM

FTFs with Track Record of ≤3 Years

All Hedge Funds


12-M

onth

Net

Ret

urn

Fig. 2: Rolling 12-Month Returns: First-Time Funds vs. All Hedge Funds (As at May 2017)

Thre

e Ye

ar V

olat

ility

0%1%2%3%4%5%6%7%8%9%

Jan-

12

May

-12

Sep-

12

Jan-

13

May

-13

Sep-

13

Jan-

14

May

-14

Sep-

14

Jan-

15

May

-15

Sep-

15

Jan-

16

May

-16

Sep-

16

Jan-

17

May

-17

FTFs with ≤$300mn in AUMFTFs with Track Record of ≤3 YearsAll Hedge Funds


Fig. 3: Three-Year Rolling Volatility: First-Time Funds vs. All Hedge Funds (As at May 2017)

https://www.preqin.com/user/hedgefunds/funds/profile/63747&src=1



Funds with a track record of three years or less show similar volatility to the wider hedge fund industry over a three-year basis. There has also been a convergence in the rolling 12-month volatility of these groups in 2017 (Fig. 3). In contrast, funds with $300mn or less in AUM, which produce smaller returns over all timeframes compared to other groups of emerging managers, exhibit the highest volatility over a 12-month, three-year and five-year period. This indicates that investors, on average, may be rewarded with higher returns with lower volatility when investing in first-time funds with a shorter track record, compared with those that have smaller AUM.

MEET THE EMERGING MANAGERSPreqin tracks 867 first-time funds with a track record of three years or less, while there are more than twice as many (1,759) first-time funds with $300mn or less in AUM.

As seen in Fig. 4, Europe accounts for a larger share (22%) of first-time hedge funds

that have $300mn or less in AUM than any other category. In contrast, just 15% of emerging managers with a track record of three years or less are based in Europe. More than two-thirds (70%) of these managers are based in North America, including Aecor Capital Management, which is headquartered in New York and was established in 2016. It launched its first fund, Aecor Fund, at the beginning of this year and employs an event driven strategy.

Of the 14,621 active hedge funds tracked on Preqin’s Hedge Fund Online, the largest proportion (43%) employ an equity strategy (Fig. 5). This is also true across the different categories of first-time funds; however, for these funds the proportions are slightly higher. Across all fund groups, the largest proportion (16%) of CTAs are managed by emerging managers with funds of $300mn or less in AUM; for example, Germany-headquartered Catana Capital launched its debut fund, Catana Big Data, in June 2016.

As expected, the average minimum investment required for both types of first-time funds is lower than that of their more established counterparts (Fig. 6). Funds with a track record of three years or less – which have significantly outperformed the wider hedge fund industry on a 12-month, three-year and five-year basis – charge similar management and performance fees to all single-manager hedge funds. In contrast, emerging managers with $300mn or less in AUM, which outperform the wider hedge fund sector but to a lesser degree

Prop

ortio

n of

Fun

ds

58%70% 67%

22%

15% 18%

15%12% 11%

6% 2% 4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FTFs with ≤$300mn in

AUM

FTFs with Track Record of ≤3

Years

All Hedge Funds

Rest of World

Asia-Pacific

Europe

North America


Fig. 4: Hedge Funds by Manager Location: Active First-Time Funds vs. All Active Hedge Funds (As at May 2017)

46% 50% 43%

8%10%

8%

7%8%

11%7%

8%11%6%

7% 8%16% 7% 9%

9% 10% 10%

1% 1% 1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FTFs with ≤$300mn in

AUM

FTFs with Track Record of ≤3 Years

All HedgeFunds

Niche Strategies

Multi-Strategy

Managed Futures/CTA

Relative Value Strategies

Credit Strategies

Event Driven Strategies

Macro Strategies

Equity Strategies


Prop

ortio

n of

Fun

ds

Fig. 5: Hedge Funds by Top-Level Strategy: Active First-Time Funds vs. All Active Hedge Funds (As at May 2017)

This indicates that investors,

on average, may be rewarded with higher returns with lower volatility when investing in first-time funds with a shorter track record, compared with those that have smaller AUM.

Fig. 6: Hedge Fund Terms and Conditions: Active First-Time Funds vs. Active Single-Manager Funds

Fund Type Mean Minimum Investment ($mn)

Mean Management Fee (%)

Mean Performance Fee (%)

Active FTFs with ≤$300mn in AUM 0.80 1.52 19.23

Active FTFs with Track Record of ≤3 Years 1.28 1.58 19.49

Active Single-Manager Hedge Funds 1.71 1.56 19.50


https://www.preqin.com/user/hf/FundManagers/HF_FundManagerGPProfile.aspx?FirmId=227358&src=1








than their counterparts with shorter track records, charge both lower management and lower performance fees.

SIGNIFICANT NUMBERS OF INVESTORS LOOK TO EMERGING MANAGERSAlthough first-time funds with a shorter track record outperform funds with smaller AUM, investors exhibit a greater preference for smaller funds than funds with a shorter track record. Nearly three-quarters (72%) of institutions that are active in hedge funds consider investing in funds with assets of $300mn or less (Fig. 7). An example of this is Singapore Management University Endowment, which allocates SGD 250mn ($181mn) to the hedge fund industry. However, there is still significant interest in funds with shorter track records. Using data taken from Preqin’s portfolio search tool, which analyzes investor preferences based on the named fund investments previously made, there are 524 investors that are invested in a fund with a track record of

three years or less. For example, Alvin & Fanny B. Thalheimer Foundation and France-Merrick Foundation, both based in Baltimore, allocate 30% of their AUM to hedge funds and have invested previously in funds with a track record of three years or less.

Almost all (92%) institutions that invest in hedge funds with a track record of three years or less are based in North America (Fig. 8). In contrast, investors in funds with $300mn or less in AUM are more geographically diverse: a significant proportion (38%) are based in Europe; for example, London-based Clerville Investment Management invests in first-time funds with a requirement of only €100mn in AUM.

OUTLOOKThere were significant outflows from the hedge fund industry in 2016; however, with better overall performance in the

last few quarters, the beginning of 2017 saw investor inflows for the first time in five successive quarters. This has set the tone for emerging managers in the hedge fund industry; with the performance of first-time funds stronger than that of the wider hedge fund industry, now could be a prime opportunity for new hedge fund managers. Notably, younger funds (those with a track record of three years or less) have generated strong returns, achieving higher net returns than small funds.

This stronger performance may encourage institutional investors to look past the risks of these first-time funds and find opportunities with emerging managers. Indeed, the volatility of the funds with a track record of three years or less has lessened and converged with that of the wider hedge fund industry, indicating that investors can access better returns with comparable investment risk.

72%

32%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Investors in FTFswith ≤$300mn in AUM

Investors in FTFs with Track Record of ≤3 Years


Prop

ortio

n of

Tota

l No.

of I

nves

tors

Fig. 7: Investor Appetite for Emerging Manager Funds

51%

92%

38%

5%8%2%

4% 1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Investors in FTFs with ≤$300mn in AUM

Investors in FTFs with Track Record of ≤3 Years

Rest of World

Asia-Pacific

Europe

North America


Prop

ortio

n of

Inve

stor

s

Fig. 8: Investors in Emerging Hedge Fund Managers by Investor Location

Preqin’s Hedge Fund Online currently tracks 14,621 active hedge funds, including 1,759 active first-time funds with $300mn or less in AUM and 867 active first-time funds with a track record of three years or less.

Performance metrics were calculated based on an Emerging Manager benchmark which was constructed on a month by month basis where the constituents were considered separately each month. Only funds which meet the Emerging Manager criteria in each given month were included, therefore the same constituent funds will not be present across the entire timeframe considered as they meet and then subsequently grow out of the given criteria.

For more information, please visit: www.preqin.com/hedge

DATA SOURCE:

https://www.preqin.com/user/hf/Investor_details.aspx?FirmID=24184&src=1




www.preqin.com/hedge




PREQIN GLOBAL DATA COVERAGE

+PLUS

Comprehensive coverage of:

+ Placement Agents + Dry Powder+ Fund Administrators + Compensation+ Law Firms + Plus much more...+ Debt Providers

THE PREQIN DIFFERENCE+ Over 250 research, support and development staff + Global presence - New York, London, Singapore, San Francisco, Hong Kong and Manila+ Depth and quality of data from direct contact methods+ Unlimited data downloads+ The most trusted name in alternative assets

*Private equity includes buyout, growth, venture capital, turnaround, private equity fund of funds, private equity secondaries, direct secondaries, balanced, hybrid, hybrid fund of funds, PIPE, co-investment and co-investment multi-manager funds.**Buyout deals: Preqin tracks private equity-backed buyout deals globally, including LBOs, growth capital, public-to-private deals, and recapitalizations. Our coverage does not include private debt and mezzanine deals.***Venture capital deals: Preqin tracks cash-for-equity investments by professional venture capital fi rms in companies globally across all venture capital stages, from seed to expansion phase. The deals fi gures provided by Preqin are based on announced venture capital rounds when the capital is committed to a company.


PRIVATE EQUITY* HEDGE FUNDS REAL ESTATE INFRASTRUCTURE PRIVATE DEBT NATURAL

RESOURCES

INVESTORCOVERAGE

6,581Active

Private Equity Investors

5,201Active

Hedge Fund Investors

5,753Active

Real Estate Investors

3,070Active

InfrastructureInvestors

2,699Active

Private Debt Investors

2,734Active

Natural Resources Investors

FUNDCOVERAGE

17,439Private Equity

Funds

24,138Hedge Funds

6,434PE Real Estate

Funds

1,148Infrastructure

Funds

2,304Private Debt

Funds

1,653Natural Resources

Funds

FIRMCOVERAGE

11,523Private Equity

Firms

8,939Hedge Fund

Firms

3,888PE Real Estate

Firms

513Infrastructure

Firms

1,475Private Debt

Firms

946Natural Resources

Firms

PERFORMANCECOVERAGE

5,841Private Equity

Funds

16,321Hedge Funds

1,676PE Real

Estate Funds

230Infrastructure

Funds

808Private Debt

Funds


Funds

FUNDRAISINGCOVERAGE

1,954Private Equity

Funds

16,773Hedge Funds

1,086PE Real

Estate Funds

269Infrastructure

Funds

306Private Debt

Funds


Funds

Alternatives Investment Consultants Coverage:

562Consultants Tracked

Funds Terms Coverage: Analysis Based on Data for Around

16,286Funds

Best Contacts: Carefully Selected from our Database of over

400,821Contacts

DEALS & EXITSCOVERAGE

BUYOUT VENTURE CAPITAL REAL ESTATE INFRASTRUCTURE

80,464 Buyout Deals** and Exits

135,415 Venture Capital Deals*** and Exits

37,056Real Estate Deals

26,801Infrastructure Deals

2015 Annual CAIA Corporate�e�o�ni� on Award Winner

As at 5th June 2017

ALTERNATIVES COVERAGE

FIRMS FUNDS FUNDS OPEN TO INVESTMENT

INVESTORSMONITORED

FUNDS WITH PERFORMANCE DEALS & EXITS

27,284 49,361 19,882 14,399 25,374 279,736

www.preqin.com/about



HEDGE FUNDS AND BREXIT: ONE YEAR ONOne year ago, two days before the UK EU referendum, Preqin released a report looking at the views of hedge fund managers on this important vote. At the time, we found that 71% of hedge fund managers predicted that the UK would choose to remain in the EU. However, with a small majority of 52% of the UK populace voting for Brexit, the UK is now on course to leave the EU by March 2019.

Here, we look at the impact of Brexit on the hedge fund industry one year on from the referendum. Preqin surveyed hedge fund managers in June, July and November 2016 and in June 2017 to assess how the UK’s decision to exit the EU is affecting the hedge fund industry in terms of their investments and performance as well as where they choose to be headquartered.

596of the 974 EU-based hedge fund

managers are UK based.

$464bnUK

$121bnEU*

409of the 774 EU-based institutional

investors in hedge funds are UK headquartered.

SIZE OF THE HEDGE FUND INDUSTRY (AS AT MARCH 2017)

*Excluding UK.

Fig. 1: Number of UK- vs. EU*-Based Hedge Fund Launches by Year of Inception, 2000 - 2017 YTD (As at June 2017)

0

50

100

150

200

250

300

350

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017YTD


No.

of F

und

Laun

ches

Year of Inception

33 45 5381 84

109 118147 148

172216 217 208 191

170191

164

33

2033

40

42 31

6169

92 88

110

110 94 10592

8973

54

7

EUUK



17%24%

12%

3%

6%

4%4%

80%70%

81%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jul-16 Nov-16 Jun-17

Do Not AnticipateChanging Location

Will Change Location tooutside the UK/EU

Will Change Location toElsewhere in the EU

Considering MovingOperations outside the UK

Uncertain

Source: Preqin Hedge Fund Manager Surveys, 2016 - 2017

Prop

ortio

n of

Res

pond

ents

Fig. 2: UK-Based Hedge Fund Manager Views on whether Brexit Will Lead to a Change in Location of Their Business Operations

13% 7%

31%

71% 79%

69%

15% 14%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

All HedgeFund Managers

UK-Based HedgeFund Managers

Rest of EU-BasedHedge Fund Managers

Negative Impact No Impact Positive Impact

Source: Preqin Hedge Fund Manager Survey, June 2017

Prop

ortio

n of

Res

pond

ents

Fig. 3: Hedge Fund Manager Views on the Impact of Brexit on Their Business

Our June 2017 survey reveals that 8% of UK-based hedge fund managers plan to move out of the UK as a direct result of Brexit. Over the second half of 2016 we saw more managers consider an exit from Britain because of Brexit; a year on from the vote these plans have become more concrete for a small number of managers.

Despite this, the majority (81%) of UK-based hedge funds have no plans to leave Britain.

Despite a small, but significant, proportion (8%) of UK-based hedge funds planning to leave the UK as a result of Brexit, 79% of UK-based firms believe Brexit will have no impact on their business, although more UK-based hedge funds believe the impact of Brexit has been positive (14%) for their business than negative (7%).

In contrast, a larger proportion (31%) of managers in the EU (excluding the UK) are experiencing negative consequences as a result of Brexit and none have seen any positive impact on their business operations as a result.

19%

12% 12%

15%14%

11%

22%

8%

0%

5%

10%

15%

20%

25%

Will Make MoreInvestments in

the UK

Will Make FewerInvestments in

the UK

Will Make MoreInvestments in

the EU

Will Make FewerInvestments in

the EU

Nov-16 Jun-17

Source: Preqin Hedge Fund Manager Survey, November 2016 and June 2017

Prop

ortio

n of

Res

pond

ents

Fig: 4: Hedge Fund Manager Views on the Impact of Brexit on Their Future Investments in the UK and EU

9%

27% 32%

17%

33%17%

34% 21%

17%

3%

0%

10%

20%

30%

40%

50%

60%

70%

Impactedover

H1 2016

ImpactedDirectly

after Vote

Impactedover

H2 2016

Impactedover

H1 2017

ExpectedImpact

over Next12 Months

Positive Impact Negative Impact

Source: Preqin Hedge Fund Manager Surveys, 2016 - 2017

Prop

ortio

n of

Res

pond

ents

Fig. 5: Hedge Fund Managers Views on the Impact of Brexit on Their Performance

Although a significant proportion of hedge fund managers in the rest of the EU are experiencing negative consequences as a result of Brexit, hedge fund managers globally have become more bullish in regards to their investments in the region. In our November 2016 survey, more fund managers (15%) planned to reduce their exposure to the EU than planned to increase it (12%); this trend has reversed in 2017, and today we see nearly 3x the number of managers planning to increase their investments in the EU than reduce them (22% vs. 8% respectively).

Similarly, more fund managers (14%) plan increased investment in the UK than to reduce their holdings in the country (11%). However, the proportion of hedge funds planning increased investment in the UK has fallen since November 2016.

Not only are hedge fund managers planning increased investment in the EU and UK as a result of Brexit, they are expecting it to have a positive impact on their performance over the next 12 months, as the ramifications become clearer.

Over the first half of 2017, 34% of fund managers reported that Brexit had impacted their performance, a decline from 53% in H2 2016.

For more free hedge fund research, data and tools, please visit our Research Center:

www.preqin.com/research

www.preqin.com/research


Preqin MobileFor Investment Professionals on the GoPrivate Equity ■ Real Estate ■ Hedge Funds

Swiftly fi nd key investor and manager information when putting together presentations

Quickly prepare for meetings with investors or managers while on the road

Easily access key investor or manager info during internal meetings

Key Data Sets:

Investors:Assets, allocations, fund portfolios, typical investment amounts, future plans and more

-

Fund Managers:Strategies, funds, fund terms, performance, known investorsand more

-

INDUSTRY NEWS


California-based investors target a range of hedge fund strategies across various locations (see page 12 for more information). Sacramento County Employees’ Retirement System (SCERS) is looking to invest between $25mn and $75mn in new funds over the next 12 months. The pension fund is not targeting any specific fund strategies, and it will look for opportunities on a global basis.

In the coming year, Silicon Valley Community Foundation (SVCF) plans to invest up to $30mn in hedge funds. The foundation is targeting hedge funds that employ long/short equity strategies.

There have been 11 hedge funds launched by North America-based managers since the beginning of 2017, including Cerebellum Capital’s Cerebellum Machine Learning Fund, L.P., which was established in April. The fund uses artificial intelligence to select positions in its portfolio and employs a multi-strategy approach with a focus on US markets.

Legion Partners Special Opportunities V is an activist fund launched in February by Legion Partners Asset Management. It utilizes event driven strategies and takes positions in small- and mid-cap North American companies.

The majority (67%) of all active hedge fund managers are located in North America (see page 3). Preqin’s Hedge Fund Online currently tracks 20 managers headquartered in the region that have

been established in 2017 so far. California-based Arts & Sciences was established earlier this year, led by former Smithwood Advisors Partner Cyrus Hadidi. It plans to pursue a long/short equity strategy and, to a lesser extent, distressed debt and corporate junk bonds.

Parplus Partners, a New York-headquartered hedge fund manager, launched this year with original backing from Ronin Capital. It employs event driven, long/short equity, macro and relative value arbitrage strategies and focuses on the European and US markets.

INDUSTRY NEWSWe review the latest news from the hedge fund industry, including California-based investors planning new investments in the coming year, as well as new North America-based hedge funds launched so far in 2017. Plus, our Chart of the Month looks at industry asset flows since 2015.

RECENT NORTH AMERICA-BASED HEDGE FUND LAUNCHES

CALIFORNIA-BASED INVESTORS PLANNING NEW INVESTMENTS

NEW NORTH AMERICA-BASED FUND MANAGERS

Ass

et F

low

s ($

bn)

Asset flows have experienced a dramatic shift in the past two years. The beginning of 2015 saw significant inflows; however, these turned into outflows for five successive quarters from Q4 2015 and throughout 2016. Despite this, between Q1 2015 and Q2 2016 the total size of the hedge fund industry remained around the $3.15tn mark, despite these changes in asset flows. Notably, the size of the industry has increased significantly in the last three quarters despite hedge funds experiencing heavy outflows: Q4 2016 saw outflows of $43bn while the total size of the industry grew to $3.2tn. This indicates that hedge funds have made strong gains to offset the capital withdrawn by investors.

CHART OF THE MONTH

+28.8

+47.5

+3.9

-8.9-14.3

-19.9

-32.5

-43.1

+19.7

3,000

3,050

3,100

3,150

3,200

3,250

3,300

3,350

3,400

-50

-40

-30

-20

-10

0

10

20

30

40

50

60

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2015 2016 2017

Asset Flows ($bn) Total Size of Industry ($bn)Source: Preqin Hedge Fund Online

Hedge Fund Asset Flows vs. Total Size of Hedge Fund Industry, Q1 2015 - Q1 2017

Total Size of Industry ($bn)

Do you have any news you would like to share with the readers of Spotlight? Perhaps you’re about to launch a new fund, have implemented a new investment strategy, or are considering investments beyond your usual geographic focus?

Send your updates to [email protected] and we will endeavour to publish them in the next issue.

SHARE YOUR NEWS












https://www.preqin.com/user/HF/FundManagers/HF_FundManagerGPProfile.aspx?FirmId=224015&src=1


[email protected]

THE FACTS


PERFORMANCE BENCHMARKSFig. 1: Summary of Preliminary May 2017 Performance Benchmarks (Net Return, %)*

May-17 Apr-17 2017 YTD 12 Months

Hedge Funds 0.23 0.79 4.35 10.31HF - Equity Strategies 0.46 1.00 5.85 12.34HF - Event Driven Strategies 0.24 1.02 4.65 14.35HF - Relative Value Strategies -0.44 0.25 1.25 4.57HF - Macro Strategies -0.13 0.12 1.18 5.25HF - Multi-Strategy 0.16 0.75 4.18 9.00HF - Credit Strategies 0.21 0.54 3.40 9.37Activist 0.32 1.11 5.25 15.44Volatility 0.60 0.61 3.16 7.14Discretionary 0.14 0.91 4.72 11.75Systematic 0.39 0.66 3.67 7.63HF - North America -0.15 0.63 3.27 11.54HF - Europe 1.00 1.17 5.20 8.81HF - Asia-Pacific 0.83 0.62 6.14 9.89HF - Developed Markets 0.34 0.59 2.94 8.74HF - Emerging Markets 0.05 1.34 6.93 14.04HF - Emerging (Less than $100mn) 0.10 0.70 4.11 10.59HF - Small ($100-499mn) 0.16 0.82 4.15 10.20HF - Medium ($500-999mn) 0.81 0.90 4.43 10.94HF - Large ($1bn plus) 0.52 0.84 4.44 9.66Funds of Hedge Funds 0.23 0.53 2.04 4.22FOHF - Equity Strategies 0.40 0.95 4.77 6.84FOHF - Multi-Strategy 0.15 0.44 2.36 4.59Funds of CTAs -0.74 0.15 -0.95 -2.91FOHF - USD 0.16 0.54 2.84 5.21FOHF - EUR 0.36 0.41 0.16 0.93Alternative Mutual Funds 0.08 0.32 2.05 4.19UCITS 0.46 0.61 3.47 5.22UCITS - Equity Strategies 0.77 0.92 5.79 7.94UCITS - Relative Value Strategies 0.50 0.19 1.45 1.42UCITS - Macro Strategies 0.10 0.25 1.51 3.73UCITS - USD 0.72 0.85 4.96 6.58UCITS - EUR 0.19 0.48 2.60 3.97CTAs 0.54 -0.40 -0.03 -0.79Discretionary -0.18 1.27 0.82 3.12Systematic 0.63 0.32 0.42 -0.22CTA - USD 0.30 0.32 0.21 -0.23CTA - EUR 0.76 0.90 1.54 1.75


Hedge funds generated a small positive return (+0.23%) for May 2017, the seventh consecutive month of positive

performance. Equity strategies funds were the biggest winner for May having posted returns of +0.46%, helping bring the Preqin All-Equity Strategies Hedge Fund benchmark to +5.85% for 2017 YTD, the highest of any top-level strategy. Europe- and Asia-Pacific-focused funds also performed well in May returning +1.00% and +0.83% respectively.

Returns across various currency denominations for May were mixed, with JPY-denominated funds generating the highest return of +1.01%. This comes after the currency depreciation of the Japanese yen increased external demand for exports, helping to boost growth of the Japanese economy. Meanwhile the corruption scandal surrounding Brazilian President Michel Temer may have contributed to the loss posted by Brazilian real funds of -1.17%.

10.8%

5.1%

5.7%8.6%

17.0%

-5%

0%

5%

10%

15%

20%

Jun-

16

Jul-1

6

Aug

-16

Sep-

16

Oct

-16

Nov

-16

Dec

-16

Jan-

17

Feb-

17

Mar

-17

Apr

-17

May

-17

USD EUR GBP JPY BRL


Cum

ulat

ive

Net

Ret

urn

Fig. 2: 12-Month Cumulative Returns of Hedge Funds by Currency Denomination (As at May 2017)

*Please note, all performance information includes preliminary data for June 2017 based on net returns reported to Preqin in early May 2017. Although stated trends and comparisons are not expected to alter significantly, final benchmark values are subject to change.

THE FACTS


ACTIVIST FUND PERFORMANCE

*Please note, all performance information includes preliminary data for June 2017 based on net returns reported to Preqin in early May 2017. Although stated trends and comparisons are not expected to alter significantly, final benchmark values are subject to change.

5.42%

15.61%

9.98% 10.02%

5.97%

4.36%

10.33%

5.34%

7.73%

4.00%

0%

2%

4%

6%

8%

10%

12%

14%

16%

2017 YTD 12 Months 3-YearAnnualized

5-YearAnnualized

3-YearVolatility

Activist Hedge Funds All Hedge Funds


Net

Ret

urn

Fig. 1: Performance of Activist Hedge Funds vs. All Hedge Funds (As at May 2017)*

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

Jan-

11M

ay-1

1

Sep-

11

Jan-

12

May

-12

Sep-

12

Jan-

13M

ay-1

3

Sep-

13

Jan-

14M

ay-1

4

Sep-

14

Jan-

15M

ay-1

5

Sep-

15

Jan-

16

May

-16

Sep-

16

Jan-

17

Activist Hedge Funds S&P 500 PR Index


12-M

onth

Net

Ret

urn

Fig. 2: Rolling 12-Month Returns: Activist Hedge Funds vs. S&P 500 PR Index

0%

5%

10%

15%

20%

25%

Jan-

14

Apr-

14

Jul-1

4

Oct

-14

Jan-

15

Apr-

15

Jul-1

5

Oct

-15

Jan-

16

Apr-

16

Jul-1

6

Oct

-16

Jan-

17

North America Europe Asia-Pacific


Thre

e-Ye

ar A

nnua

lized

Ret

urn

Fig. 3: Rolling Three-Year Annualized Returns of Activist Hedge Funds by Geographic Focus

-18%

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

Mar

-11

Jun-

11Se

p-11

Dec

-11

Mar

-12

Jun-

12Se

p-12

Dec

-12

Mar

-13

Jun-

13Se

p-13

Dec

-13

Mar

-14

Jun-

14Se

p-14

Dec

-14

Mar

-15

Jun-

15Se

p-15

Dec

-15

Mar

-16

Jun-

16Se

p-16

Dec

-16

Mar

-17

Activist Hedge Funds S&P 500 PR Index


Dra

wdo

wn

Size

Fig. 4: Drawdowns of Activist Hedge Funds vs. S&P 500 PR Index (As at May 2017)

Fig. 5: Sample Activist Hedge Funds Launched in 2017

Fund Inception Date Geographic Focus Manager Location

Bentham IMF 1 Feb-17 North America US

Fir Tree Capital Opportunity Master Fund III Jan-17 North America US

Standard General Fund II Feb-17 North America US


Fig. 6: Top Performing Activist Hedge Funds by 12-Month Net Return (As at May 2017)*

Fund Manager Manager Location 12-Month Net Return (%)

Guepardo Master Fund Guepardo Investimentos Brazil 47.27

Doric Asia Pacific Small Cap Fund - Series 1 (Base) Doric Capital Corporation Hong Kong 45.06

FAMA Brazil Cayman Feeder Fund FAMA Investimentos Brazil 35.22

UG Hidden Dragon Special Opportunity Fund - Class A UG Investment Advisers Taiwan 34.05

Teleios Global Opportunities Fund, Ltd Teleios Capital Partners Switzerland 30.25


We examine the performance of activist hedge funds, including launches in 2017 and top performing activist hedge funds by 12-month return.

THE FACTS


CALIFORNIA-BASED HEDGE FUND INVESTORSWe examine the make-up of hedge fund investors based in California by type, location, strategy preference and more.

71%

54% 50%43% 40% 38%

33% 30%

20% 19%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Long

/Sho

rt E

quity

Even

t Driv

en

Mul

ti-St

rate

gy

Long

/Sho

rt C

redi

t

Dis

tres

sed

Fixe

d In

com

e

Mac

ro

Rela

tive

Valu

eAr

bitr

age

Man

aged

Fut

ures

/CT

A

Equi

ty M

arke

tN

eutr

al


Prop

ortio

n of

Inve

stor

s

Strategy Preference

Fig. 3: Strategy Preferences of California-Based Investors Active in Hedge Funds

Fig. 4: Five Largest California-Based Investors by Current Allocation to Hedge Funds

Investor Type Location

Current Allocation to Hedge Funds

($bn)

Regents of the University of California

Public Pension Fund Oakland 6.1

Stanford Management Company

Endowment Plan Stanford 5.2

CTC myCFO Multi-Family Office Palo Alto 5.0

California State Teachers' Retirement System (CalSTRS)

Public Pension Fund Sacramento 3.6

Kaiser Permanente Pension Plan

Private Sector Pension Fund Oakland 2.6



Fig. 1: California-Based Hedge Fund Investors by TypeFig. 2: Number of Active Hedge Fund Investors based in the Top Five Locations in California


CA

L I FO

RN

I A

San Francisco

19%65

Los Angeles

19%44

San Diego

19%18

Menlo Park

19%12

Palo Alto

19%14

30%

13%

12%10%

7%

4%

10%

15%

PrivateWealth

Institutional

Foundation

Endowment Plan

Private Sector Pension Fund

Fund of Hedge Funds Manager

Public Pension Fund

Other

Family Office

Wealth Manager

Geographic Preferences of California-Based Investors Active in Hedge Funds:

Fund Type Preferences of California-Based Investors Active in Hedge Funds:

California-Based Hedge Fund Investors that Will Invest with Emerging Managers:

91%

44%38%

NorthAmerica

Europe Asia

50%

32%

18%

DirectBoth Direct and Fund of Hedge FundsFund of Hedge Funds

31%

23%

46%

Will InvestConsider InvestingWill Not Invest

HOW PREQIN CAN HELP YOU FUNDRAISE IN 2017

Although there are more institutional investors than ever currently investing in hedge funds – over 5,100 globally – fundraising in 2017 is undoubtedly challenging. The net outflows of $110bn seen in 2016 look set to continue in 2017: twice as many investors plan to reduce their exposure to hedge funds over the coming year than plan to increase it.

Despite this, there are opportunities to grow your fund over the course of 2017 – with industry-leading data and tools, Preqin will help you in finding those investors looking for new hedge funds today.

We have

250multilingual research analysts based in the US,

London, Hong Kong and Singapore.

Each month our team have thousands of conversations with investors to find out more

about their alternative investments.

With researchers on the ground, Preqin is the first to find out the latest hedge fund searches

among the

5,100+institutions tracked by Preqin globally.

Our fully searchable database allows you to target those investors interested in your fund

and to find contact details for more than

12,000key decision makers at these institutions.

9out of the top

10hedge funds that saw the largest

inflows in 2016 rely on Preqin data.

6,000investment professionals in

90+countries use Preqin’s data.

56754613

06801970

41574302

86045684

13279568

41025486

15423148

65749801

64535790

46830241

86304726

83185264

85790149

56575168

94647864


2.5xPreqin clients raised more than twice

as much capital in 2016 than all other funds*.

*Of the firms that saw inflows in 2016, Preqin clients, on average, raised $116mn compared to $48mn for all other funds.

PREQIN IS HELPING RAISE CAPITAL FOR HEDGE FUNDS TODAY

HOW PREQIN HELPS TO RAISE CAPITAL FOR HEDGE FUNDS

Investors have indicated they are looking for up to

800new hedge funds in the

next 12 months.

The average hedge fund investor looking to make new investments in the next 12 months

plans to invest between

$62mnand

$85mn

With over

5,100investors profiled on the Preqin platform, we

can help pinpoint those investors that are looking for you.

798 799 801 802800

Forward-looking data on future plans and full

investment history of each institution.

Strategy, fund type and geographic preferences for

each institution.

AUM and track record requirements of investors

in hedge funds.

Full contact details for key decision makers, including

the best method to approach the investor.

Fund-level investments on a named basis to see who they have invested

with and how that fund is performing.

HOW PREQIN CAN HELP YOU FUNDRAISE IN 2017

Hedge Fund Online is Preqin’s award-winning hedge fund information resource, incorporating all of our hedge fund data, intelligence and functionality, providing you with the most comprehensive coverage of the asset class available.

Register for demo access to find out how Preqin’s Hedge Fund Online can help your business:

www.preqin.com/demo

PREQIN CAN HELP RAISE CAPITAL FOR YOUR HEDGE FUNDS IN 2017

TAILOR YOUR PITCH USING PREQIN DATA

CONTACT US




www.preqin.com/demo

THE FACTS


UCITS HEDGE FUNDSWe examine the latest data on UCITS hedge funds, including launches and liquidations, fund managers over time and assets under management.

10 15 630 38

55 60

128

176

141

103123

137 141

101

16-21

-57 -63 -72 -53 -5

-100

-50

0

50

100

150

200

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

YTD

Launches Liquidations


Fig. 1: UCITS Hedge Fund Launches and Liquidations over Time, 2002 - 2017 YTD (As at June 2017)

37 45 48 62 77102

135

179

250

310333

363388

420 436 440

0

50

100

150

200

250

300

350

400

450

500

Dec

-02

Sep-

03

Jun-

04

Mar

-05

Dec

-05

Sep-

06

Jun-

07

Mar

-08

Dec

-08

Sep-

09

Jun-

10

Mar

-11

Dec

-11

Sep-

12

Jun-

13

Mar

-14

Dec

-14

Sep-

15

Jun-

16

Mar

-17


Fig. 2: Active UCITS Hedge Fund Managers over Time, 2002 - 2017 YTD (As at June 2017)

54%

32%

8%2% 4%

Luxembourg

Ireland

France

Germany

Other


Fig. 3: Active UCITS Hedge Funds by Domicile (As at June 2017)

40%

12%4%

15%

10%

7%

12%1% Equity Strategies

Macro Strategies

Event Driven Strategies

Credit Strategies

Relative Value Strategies

Managed Futures/CTA

Multi-Strategy

Niche Strategies


Fig. 4: Active UCITS Hedge Funds by Core Strategy (As at June 2017)

57%

29%

6% 8%

0%

10%

20%

30%

40%

50%

60%

Less than $100mn $100-499mn $500-999mn $1bn or More


Fig. 5: Active UCITS Hedge Funds by Assets under Management (As at June 2017)

No.

of L

aunc

hes/

Liqu

idat

ions

Year of Inception/Liquidation

No.

of A

ctiv

e U

CITS

Fun

d M

anag

ers

Fig. 6: Hedge Fund Fees: UCITS vs. Commingled Funds

Structure Mean Management Fee

Mean Performance Fee

Commingled Hedge Funds 1.57% 19.33%

UCITS Hedge Funds 1.29% 16.05%


Assets under Management

Prop

ortio

n of

Fun

ds

Kathleen Kennedy Townsend, Managing Director, The Rock Creek Group

Stuart Fiertz, Co-Founder and President, Cheyne Capital Management

Bruce Richards, Co-Managing Partner and CEO, Marathon Asset Management

Briant Lahart, Managing Director, Asset Management, Abbot Downing

Ed Rzeszowski, Managing Director, BlackRock

Early Confirmed Speakers include:

Preqin subscribers receive 15% discount using code ‘PQ15’

www.imn.org/totalalts | [email protected] | (212)224-3207

ToTal alTs 2017 september 7-8, 2017 | san Francisco, Ca

an exploration of alternative investments

www.catalystforum.com

mailto:info:catalystforum.com

http://www.imn.org/totalalts

mailto:[email protected]

THE FACTS


FUND SEARCHES AND MANDATES

52%

36%

12%

North America

Europe

Asia-Pacific & Rest ofWorld


Fig. 1: Hedge Fund Searches Issued by Investor Location, May 2017

71%

10%

4%3%

2%

2%2%

2%2%

2%Fund of Hedge FundsManagerFamily Office

Asset Manager

Private Sector Pension Fund

Bank

Corporate Investor

Insurance Company

Investment Company

Public Pension Fund

Wealth Manager


Fig. 2: Hedge Fund Searches Issued by Investor Type, May 2017

58%

27%23%

19% 19%15% 15% 15% 15%

12%

0%

10%

20%

30%

40%

50%

60%

70%

Long

/Sho

rtEq

uity

Even

t Driv

en

Man

aged

Fut

ures

/CT

A

Fixe

d In

com

e

Mac

ro

Dis

tres

sed

Long

Bia

s

Long

/Sho

rtCr

edit

Mul

ti-St

rate

gy

Com

mod

ities


Prop

ortio

n of

Fun

d Se

arch

es

Fig. 3: Hedge Fund Searches Issued by Strategy, May 2017

Subscribers to Hedge Fund Online can click here to view detailed profiles of 392 institutional investors in hedge funds actively searching for new investments via the Fund Searches and Mandates feature on Preqin’s Hedge Fund Online.

Preqin tracks the future investment plans of investors in hedge funds, allowing subscribers to source investors actively seeking to invest capital in new hedge fund investments.

Not yet a subscriber? For more information, or to arrangea demonstration, please visit: www.preqin.com/hedge

DATA SOURCE:

Fig. 4: Sample Hedge Fund Searches Issued, May 2017

Investor Type Location Investment Plans for Next 12 Months

Optimized Portfolio Management

Investment Company Sweden

The investment company plans to invest up to £40mn in 5-7 funds over the coming year on a global basis, including macro, long/short equity, managed futures/CTA, event driven and equity market neutral funds.

AlphaWealth Fund of Hedge Funds Manager South Africa

The fund of hedge funds plans to add five new funds to its portfolio in the next 12 months, allocating a total of ZAR 80mn specifically to bond and fixed income strategies. It will focus its investments on emerging markets domestically and globally, particularly looking at Europe, Japan and China.

CTC myCFO Multi-Family Office US

The California-based family office plans to invest between $300mn and $400mn both directly in hedge funds and in funds of hedge funds over the next year. It will focus on long/short equity, relative value arbitrage and event driven strategies on a global basis. It will invest with a mix of both new and existing managers.


We analyze the fund searches and mandates issued by hedge fund investors in May 2017.


CONFERENCES


CONFERENCESJULY 2017

Conference Dates Location Organizer Preqin Speaker Discount Code

Alternative Investment Consultants Summit 20 July 2017 Stamford, CT

Investment Management

Institute - $300 Discount -

IMICT165

Family Office & Private Wealth Management Forum 2017 24 - 26 July 2017 Newport, RI Opal Financial

Group - -

SEPTEMBER 2017


Total Alts 2017 7 - 8 September 2017 San Francisco, CA IMN TBC -

AIMA Australia Annual Forum 2017 12 September 2017 Sydney AIMA - -

CTA Expo Chicago 14 September 2017 Chicago, MA CTA Expo Amy Bensted -

Cap Intro: L/S Equity | Event Driven Alternative Investing 18 September 2017 New York Catalyst Financial

Partners - -

Ai CEO Institutional Investment Summit 2017 18 September 2017 New York Africa Investor - -

AIMA Canada Investor Forum 2017 25 September 2017 Montréal AIMA - -

UCITS & AIDMD London 26 - 27 September 2017 London KNect365 - -

Channel Islands Funds Forum 2017 27 September 2017 Jersey BL Global Amy Bensted Tom Carr -


Australian Investors Summit 2017 5 - 6 October 2017 Sydney marcus evans Summits - -

Latin Private Wealth Management Summit 9 - 10 October 2017 Cancún marcus evans

Summits - -

FundForum Middle East & Africa 9 - 11 October 2017 Dubai KNect365 - -

Cap Intro: Credit | Fixed Income Alternative Investing 16 October 2017 New York Catalyst Financial

Partners - -

C4K Investors Conference 18 - 19 October 2017 Toronto Capitalize for Kids - -

Family Office & Private Wealth Forum – West 25 - 27 October 2017 Napa, CA Opal Financial

Group - -

Private Wealth Management Summit APAC 2017

30 October - 1 November 2017 Macao marcus evans

Summits - -

OCTOBER 2017


Hedge Fund Investor Leadership Summit 2 - 3 November 2017 New York Agecroft Partners - -

9th Annual Women’s Alternative Investment Summit (WAIS) 2 - 3 November 2017 New York Falk Marques Group - -

Quant World Canada 2017 9 November 2017 Toronto Terrapinn - -

NOVEMBER 2017

CONFERENCES

DATE: 7 - 8 September 2017

INFORMATION: www.imn.org/totalalts

LOCATION: San Francisco, CA

ORGANIZER: IMN

Total Alts will reflect the growth and dynamism of the wider world of alternatives and will provide LPs with access to insights from the sharpest minds in private equity, venture capital, private debt, real assets, hedge funds and so much more!

Join us this September 7-8 at the Ritz-Carlton in San Francisco, as we explore and explain the ever-growing and evolving alternative investments landscape.

TOTAL ALTS 2017

ACCESS FREE CONFERENCE SLIDE DECKS AND PRESENTATIONS

Preqin attends and speaks at many different alternative assets conferences throughout the year, covering topics from infrastructure fundraising trends to alternative UCITS.

All of the conference presentations given by Preqin speakers, which feature charts and league tables from Preqin’s online products, can be viewed and downloaded from Preqin’s Research Center Premium, for free.

For more information, and to register for Preqin’s Research Center Premium, please visit:

www.preqin.com/rcp

DATE: 18 September 2017

INFORMATION: http://catalystforum.com/events/ls-equity-event-alternative-investing/

LOCATION: New York City

ORGANIZER: Catalyst Financial Partners

Catalyst Cap Intro events are investor driven and transactional events that host alpha-oriented investment managers and institutional grade investors that are introduced to each other with a view to become investment partners.

This Catalyst Cap Intro Event focuses only on the L/S Equity | Event Driven Investing space. Strategies covered include, among others: fundamental research, global equity, merger arbitrage, small/micro caps, regional/international, industry specific, trend/signals, as well as event driven funds based on behavior, public reports, litigation, adverse news, structural change, insider filings, and more.

CATALYST CAP INTRO: L/S EQUITY | EVENT DRIVEN INVESTING

www.imn.org/totalalts

http://catalystforum.com/events/ls-equity-event-alternative-investing/

www.preqin.com/rcp

www.preqin.com/rcp

www.preqin.com/rcp

hedge fundspotlight - preqin · fig. 1: performance of first-time funds vs. all hedge funds (as at...

Documents