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Alternative Market Briefing

Hedge fund assets: older, bigger shops control and gather the most assets

Thursday, April 10, 2014

Bailey McCann, Opalesque New York:

eVestment is out with a new report that looks at the age and asset raising of hedge funds for possible correlations. Not surprisingly, the oldest, biggest hedge funds have the most assets. Also not surprisingly, these funds typically have a slightly lower rate of return than their smaller counterparts. One interesting nuance however is that age appears to play a bigger role in performance than asset size in some cases.

Looking at the report data it appears that hedge funds have a lifecycle, and the older they get the slower they get. An index of funds with less than two years of track record (rebalanced annually) outperformed mid-aged (2-5 yrs.) and tenured (over 5 yrs.) funds in each year from 2003 through 2013. The institutionalization of the industry is also driving this as institutions tend to prefer longer track records and slower moving funds.

The industry is also showing signs of mid-life weight gain. At no point in the last 11 years have both large and tenured funds accounted for as large a proportion of the overall industry as during 2013. The percentage of large funds that are tenured (over 5 years old) rose from 61.7% in 2003 to 78.35% in 2013.

The bulk is carrying over to new launches as well. Funds are launching larger and growing more quickly. The percentage of small, young funds has declined every year since 2004, down from 94% in 2004 to 77% in 2013. In the same time period, the percentage of mid-sized funds......................

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