20 Financial Sector Specialist Hedge Funds The Daddy of the sector Tosca had a great 2012 (up 25%) , and William De Winton’s Lansdowne Financials Fund did very well (up 17.8%) – both have started 2013 well, as have sector tiddlers like Moors & Mendon Master Fund (5.8% YTD after 43.8% last year), and Financial Stocks Limited Partnership up 3.5% after 24% last year.
19 US Onshore Hedge Funds The industry started in the States, and most of the industry assets are still managed from the U.S. What may not be well known is that (U.S.) onshore hedge funds have stopped shrinking as a proportion of the industry when looking at the number of funds. 25% of the industry funds were onshore in the US in 2010, that percentage shrank to just over 22% the following year, but according to EurekaHedge data Onshore U.S. hedge funds were 22.62% of the world’s funds in 2012.
18 UK Equity Long/Short Funds The UK may be Europe’s largest equity market but those who specialise in it do not get full attention in the hedge fund world. These 2012 returns will help – the Henderson UK Absolute Return Fund up 34.2%, Polar Capital UK up 37.61% and the Gartmore UK Small Cap Best Ideas Fund up 28.96%.
17 Bridgewater Associates Although already the world’s largest independent hedge fund management group, the Westport macro mavens are hot because they are launching a new fund this year – the All Weather Major Markets Fund – and not because they have become Connecticut’s largest employer.
16 BTG Pactual Two funds in the best performers list of 2012 – the Distressed Mortgage Fund up 46%, and the flagship Global Emerging Markets and Macro Fund gaining 28.1 percent
15 WF Asia Fund After a cracking 2012 (up 27.68%) Scobie Ward and Peter Ferry are off to a decent start this year too – up over 2 1/2 % in January.
14 Capula Investment Management On the back of becoming an institutional favourite for hedge fund allocations Capula has increased its professional investment staff by over 60% in 2 years.
13 Marcato Capital Management Returns to value have been good for Richard McGuire recently – up 28.67% in 2012. Mercato has just announced that McGuire is seeking to join the Board of Lear Corporation – at least the seating should be comfortable.
12 Third Point Look no further for who is hot amongst activists than the man with the hottest pen – Dan Loeb. Has letter writing had a better pay-off? Third Point Offshore was up 21.6% last year, with the Ultra version up a steaming 34.47%. 2013 has started well too for Third Point.
11 Titanium Capital Macro FX programme The systematic currency programme is up over 30% in the last 12 months, and 4.5% in January.
10 Hedge Fund M&A Whether it is single manager or fund of hedge funds the deal flow continues into 2013. The reasons for each type to be engaged in M&A are different, but for each the dynamics that brought deals late in 2012 are still at work today, so expect more stake sales, mergers and a significant flotation by year end.
9 Not So Much the EU The head office location of a hedge fund manager used to be a function of where the principals worked before they set up their first fund. Now taxation and regulation have more impact, and the consequences of the negative attitude of the political and executive classes of the EU is showing up via database analysis (EurekaHedge). The percentage of managers in London, Italy and Luxembourg is down, at the margin, and up in the Channel Islands, and more significantly in Switzerland. Malta may be the home du jour for 2013.
8 Aksia The investment consultant to pension plans facilitates the trend to going direct – for example Aksia helped New York City make its first five direct hedge fund investments last year
7 Distribution Via Hedge Fund Platforms Never slow to miss an opportunity in distribution, Winton Capital is again at the leading edge of practice by signing up with Morgan Stanley’s FundLogic Alternatives. The UCITS compliant package has been put together through CTA specialists Equinox Fund Management.
6 Lyxor Asset Management The institutional investor bias towards the use of managed account structures plays into one of Lyxor’s strengths. Winning awards 7 times in 2012 for “Best Managed Account Platform” is not the reason Lyxor are hot. The breakthrough of use of managed accounts on offshore fee scales is a commercial masterstroke.
5 Blackstone Alternative Asset Management J. Tomilson Hill’s decision to look to buy stakes in mature single manager hedge fund businesses, as well as provide early stage capital is right of the moment. It helps if your base fund of hedge fund business is still growing too, as is the case at Blackstone.
4 Dan Och The CEO of Och-Ziff is totemic of one side of the deeper relationship with managers sought by some investing institutions. “Sharing the breadth of our knowledge is a natural outgrowth of what we do,” says Och. An example was the increasing closeness of OZM with the New Jersey Division of Investment which resulted in a doubling of the investors allocation. Surely the best way to express increasing depth of relationship.
3 AIFMD The EU is the regulatory gift that keeps on giving. Service providers to hedge funds are scrambling to build reporting and risk management requirement routines to meet the demands of the Alternative Investment Fund Managers Directive.
2 Compliance Officers With 1500 hedge fund investment advisors registering with the SEC for the first time it is certain that the industry needs more compliance resource. Some of the resource will be more time bought from compliance consultants, some part-time compliance staff will go full time, and hedge funds will have to recruit more compliance professionals.
1 Bigger is Best (again) There is no sign yet that the trend for the hedge fund industry to concentrate is changing. Pension plan flows dominate, pension plans use consultants, consultants seldom go outside the small group of super-sized managers in the winners enclosure. Only the closure to new capital of many of these brand name hedge funds will force a change.
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.