By Staff Writers of Hedge Fund Insight, led by Simon Kerr
There are a lot of lists of hedge funds and hedge fund related business. Usually and appropriately for an absolute return concept, the lists are usually about absolute size. “Who is the Daddy?” tends to be the main question. Hedge Fund Insight is seeking to answer a slightly different question in compiling the first HFI Hedge Fund Hot 100.
As Hedge Fund Insight is about adding commentary and context to the bald facts about the hedge fund industry our Hot 100 is about what is moving in the industry. “What is making waves?” and “what is growing?” are key questions. The HFI Hedge Fund Hot 100 is not a ranking. So the firms and people in the nineties are not smaller or less important than those in the number range 30-to-40, with one exception. The Top 10 references the most important themes for the industry currently.
Naturally, as 80% of hedge fund selection is about a fund’s return series, the most common factor for inclusion in the Hot 100 is return, and recent return at that. What will get investor attention is superior performance versus the industry and against a peer group of some sort. All humans suffer from recent experience/data bias, the compilers of the Hedge Fund Hot 100 do too. So in this list most weighting for consideration has been given to returns over a recent year – usually the calendar year of 2012, but sometimes over the last twelve months to the end of January 2013. One or three months is a more immediate time frame for assessment, but in reality those in the hedge fund industry don’t react to or in those lengths of time.
What is topical or Hot in the industry is not just hedge funds, funds of hedge funds or their managers. All sorts of businesses service hedge fund management companies and their owners. The Hedge Fund Insight Hedge Fund Hot 100 gives some acknowledgement to service providers, mostly where the hot label can be applied where it can be justified by external verification in surveys and awards. If any service providers can be making commercial hay it should be those that get external recognition by peers and clients. Lawyers, prime brokers and hedge fund administrators have been included on this basis.
Another means of qualification for the HFI Hedge Fund Hot 100 is through growth by M&A. Acquisition or merger can be a sign of strength or weakness in commercial positioning. Acquiring companies tend to be seen as victors, and to the extent that the new shape of group can impact sector business models they should be included. The Hot 100 is about business momentum as much as anything else. Who is taking share in a business line can be just as important as who has the best organic growth, particularly for the more mature areas of activity of the hedge fund world.
Finally Hedge Fund Insight gives evidence in its content that it has a sense of humour, and is prepared to take a rounded view of what is relevant to those working in the hedge fund industry. The Hot 100 makes some calls on what is hot in a media sense and acknowledges the best charitable work of recent times that has been funded by hedgies.
As a first effort the Hedge Fund Hot 100 will not be as Hot as subsequent editions. Some data has been collected for the first time, so it has not been possible to identify which people or firms have the most growth, as opposed to which are the largest at one particular time. With more snapshots of data the dynamics will become clearer, and what is truly Hot will be selected
As ever with topics and coverage on Hedge Fund Insight, you the reader are allowed to disagree with what has been selected or neglected in the Hedge Fund Hot 100, and you are invited to comment and take a right or reply via the comments section below this article.
100 The JOBS Act Passed into law in April the JOBS Act is intended to allow hedge funds to advertise, though still only sell to accredited investors. The SEC has yet to issue guidelines on how hedge fund firms should operate in this area. The best business managers of hedge funds are planning now on what kind of brand they want to build. Campaign design comes later.
99 Milltrust Platform It’s okay, if not required, to have a robust platform with great infrastructure and a good capability to carry out marketing, but really makes a UCITS hedge fund hum is good returns. Milltrust is batting three for three. The first three funds are a Greater China Fund, managed by Value Partners in China, a Latin American equities fund managed by Banco Itaú and a Brazil equities fund run by BTG Pactual. They are up 19.36%, 24.86% and 18.15% since launch in June last year.
98 HFT for CTAs CTAs have struggled for returns over the last few years. A partial solution has been to allocate more to trading in instruments other than futures, such as equities. The most common area to receive increased research and capital budgets has been high frequency trading systems.
97 Lansdowne Developed Markets Fund The Lansdowne Developed Markets Fund may have the best read hedge fund letter in Europe, but that is not the reason the Fund is hot. Neither is the fact that Lansdowne is the most commonly searched for hedge fund name in Europe. Stuart Roden and Pete Davies’ fund is include because of returns – the Developed Markets Fund was up 18.16% last year and up 5.1% in January.
96 Secondary Market The market for shares in hedge funds has been around for some years, but it came into prominence after side-pocketing and gating became de rigeur in 2008/9. Volumes traded are going up, and the number of intermediaries has grown; they include Tullett Prebon, Hedgebay,Wake2o, Gamma Finance and Morgan Stanley’s Alternative Investment Partners. There is another year left of good activity.
95 Hedge Fund Insight.org Fast growing new hedge fund media presence. The proportion of visitors to the site that are returning has doubled since the start of this year.
94 MLIS Theorema European Equity L/S Fund The SICAV version of the Giovanni Govi’s hedge fund had as good a three months from Nov-Jan as it could given its style – up 7.41%.
93 Going Direct This week the Colorado Fire & Police Pension Association terminated K2 Advisors’ mandate for a commodity fund of funds. The termination is part of the pension fund’s strategy to have internal oversight over direct investments in hedge funds.
92 MKP Capital Management The New York hedge fund manager has started off 2013 the way it finished 2012: In November the State of Wisconsin Investment Board awarded a $125 million mandate to the firm’s credit strategy MKP Opportunity. The California State Teachers’ Retirement System has allocated MKP $50m this month in its innovation portfolio, which provides a way to research managers and strategies that may be expanded upon. More to come then.
91 Robin Hood Relief Fund The Robin Hood Foundation was started by Paul Tudor Jones to help the New York area. The concept really worked after Hurricane Sandy hit. Having raised $67.5m for Sandy relief, mostly through the 121212 concert, the Robin Hood Relief Committee has already allocated or disbursed 75% of that money and the rest will be paid out within 100 days of 121212. Top work.
90 Maverick Capital Lee Ainslie is capitalising on his success in 2012, when his fund was up 16%, by making available to outside capital a concentrated version of the Maverick Fund. Maverick Select will be capped at $1bn.
89 Cheyne Capital Corporate Credit Team Picking out one fund managed by the crossover corporate credit specialists would diminish the breadth of their current heat: Creditflux shows 4 Cheyne funds: Total Return Credit Fund (up 69% in 2012), Managed CSO Fund (up 18.8%), Cheyne Long Short Credit Fund up 26.89% and the CDO Fund up 70.94%
88 AHL Evolution If Man Investments are going to be the comeback kings this year then this might be the source of their redemption – the side project is up 22.1% over the last 12 months
87 Alcentra Structured Credit Opportunity Fund BNY Mellon’s Alcentra runs the top European fixed income hedge fund – up a spectacular 44.14% in the last 12 months, and with a CAGR of 50.08% since inception
86 HedgeServ This hedge fund administrator not only was ranked the top firm of its type overall in the Alpha Awards, it was also top rated in each category of service provision. Not bad for a 5 year old firm. Currently administers $160bn of assets
85 SEC’s Targeted Enforcement and Exam Teams The focus of the SEC’s specialist hedge fund teams will continue to be (over)valuation of positions – the SEC teams will test the funds’ valuation methodologies. The SEC’s Aberrational Performance Inquiry is now focused on a subset of hedge fund strategies that have a high incidence of suspicious returns, according to a recent speech by the Chief of the Enforcement Division’s Asset Management Unit
84 Newedge Group In the annual Global Custodian survey of the perceptions of prime brokers by their hedge fund clients NewEdge Group saw a good improvement to their average scores.
83 Grosvenor Capital Management The fastest hedgie is Christina Fiduccia of Grosvenor Capital Management in Chicago. She is the only hedge fund employee or partner to rank in the all time top ten for the J.P.Morgan Challenge series of runs.
82 Finalternatives.com The highest ranked hedge fund media property for traffic on Alexa.com is www.finalternatives.com – ranked at 187,000
81 Castlerigg Merger Arbitrage Fund The alternative UCITS category is poorly represented in the event driven strategy. The Castlerigg Merger Arb Fund makes the case for inclusion of the strategy on its own – up 11.46% over the last 12 months.
Great list! Thanks
Those trading against the london whale should be mentioned. Also see no reference to Paulson, which is not a bad thing.
The stellar returns often come from outsized bets that are difficult to repeat year after year. Must apply a strict quality filter to them.
Quite right there is no mention of Paulson, is there a ground on which he qualifies as hot?
On the London whale trade – it is not mentioned specifically, but I would like to think that some of the beneficiaries are in the Hot 100 somewhere.