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Bridgewater Associates: largest U.S. hedge fund secures largest allocations

Friday, October 01, 2010
Opalesque Industry Update – Size does matter.

At least as far as the hedge fund industry is concerned. On Thursday, Absolute Return (AR) released the results of its study of hedge fund assets (as of July 1, 2010). The largest hedge fund, Bridgewater Associates manages $80bn in assets, and secured the largest inflows in the first half of 2010 compared with rivals.

Bridgewater, a 35-year-old firm founded by Ray Dalio maintained its rank as the largest U.S. hedge fund and the industry’s most popular, AR magazine reported. The Westport, Connecticut-based firm piled up an additional $7.3bn in new money or an increase of 17% in its AuM, the biggest gain in 2010.

Reuters added that firms managing $5bn in assets or more saw their capital jump by at least one percent during the first half. But at least 50% of firms managing only $1bn or more saw their assets decline or stayed unchanged during the same period.

Another large hedge funds that reported inflows was JP Morgan’s asset management unit. The second-largest U.S.-based hedge fund saw its assets increase to $41bn, or an increase of $2.7bn.

Completing the first-half asset winners were George Soros' Soros Fund Management; Och-Ziff Capital Management Group; BlackRock; Angelo, Gordon & Co; Seth Klarman's Baupost Group, and Thomas Steyer's Farallon Capital Management. Each managing $20 billion or more, the AR Magazine reported.

Losers too
But as there were winners, there were also losers in the asset race.

AR revealed that Paulson & Co, the thirst-largest hedge fund with $31bn in assets, saw its flagship fund lose 11% through the end of August. But while its AuM is down from $32bn at the start of the year, it is up from $27bn in mid-2009.

Although the biggest loser so far this year was D.E. Shaw, which managed $17.8bn as of July 1, 2010. Its AuM declined by $5.8bn as the fund was plagued by investor redemptions.

At the height of the financial crisis, D.E. Shaw locked up its assets to investors in 2008. It has recently unlocked those funds.

The Wall Street Journal quoted AR magazine as commenting on D.E. Shaw’s predicament, "D.E. Shaw has lost more than one third of its total hedge fund assets under management in the past year. Most of that loss occurred in the second half of 2009, when the firm paid out redemptions after having suspended investor withdrawal requests in 2008," it said.

On Tuesday, D.E. Shaw announced its decision to cut its work force by 10%, affecting 150 personnel, after its assets fell by almost half in the past two years.

Growing trend
AR Magazine’s report came as a no surprise as experts have been forecasting the shift of investors towards more stable and bigger hedge funds when allocating their money.

Only recently, Narayan Naik Professor at the London Business School and Director of the Hedge Funds Centre, recently spoke with Matthias Knab of OpalesqueTV, where he discussed the growing trend of concentration of asset allocations towards bigger hedge funds. He based this observation tracking industry trends in the past eight years, he said.

Professor Naik explainied that the concentration was continuing to increase, growing from the top 10% of managers overseeing 75% of the hedge fund industry's assets to the top 10% of managers overseeing 85% of the hedge fund industry's assets (See Opalesque Exclusive: here).

A similar survey by JP Morgan Prime Brokerage titled “ Tectonics: Shifting Investor Sentiment and the Implications for Hedge Fund Managers,” shows a growing biased towards more established and bigger hedge funds (See Opalesque Exclusive: here).

The survey polled some 300 institutional investors managing some $2.4tln in global assets, and showed a massive reallocation of assets, a trend which the firm anticipates is likely to accelerate this year.
- Precy Dumlao
PD

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