Focus on North America – Investors flock to US hedge funds despite recent losses

Markets in America, the ‘home the hedge fund’, inflicted losses on managers focused on them in June, but inflow data suggests investors still prefer portfolios focused there than any other geography.

Data providers Eurekahedge found North American-focused funds took in new business of $660bn in June, more than double the amount of the next-most popular region (Asia ex-Japan), which absorbed $300m.

North American funds now command $1.19trn, comfortably over half the $1.74trn that Eurekahedge estimates the entire industry holds.

So far this year, North American-focused funds have taken in proportionally the most new business (nearly 15%) and made the biggest gains (of around 7%).

Such statistics have helped North American hedge mandates grow in importance since 2008, from 64% of industry assets, to 69% last year. About one third of the industry’s managers are based there.

But tough North American markets in June wiped $4.9bn off the value of portfolios focused there, and left total portfolio assets 0.4% by 30 June.

North American funds have certainly not been immune from tough markets, and tough investors, over the years.

Clients pulled money from them each month last year from September onwards, and they lost business in two months of five by May this year.

Recent research from Goldman Sachs shows US funds are also dominant in their industry when it comes to owning equities, as revealed by their mid-year 13F top US holdings filings.

Renaissance Technologies, founded by academic James Simons, had $33bn at play in the 2,934 securities, according to Goldman Sachs’ analysis, with three others holding at least $20bn worth.

They were Ken Griffin’s Citadel Advisors ($27bn); Phillip Gloss and Robert Atchinson’s Adage Capital Advisors ($25bn); and David Shaw’s D.E. Shaw & Co ($25bn).

Others Americans the top 10 included Lone Pine Capital and AQR Capital Management ($18bn each), SAC Capital Advisors ($15bn); Two Sigma Investments ($13bn), Viking Global Investors and Apollo Capital Management (each with $12bn).

Equity asset volumes are, not surprisingly, clustered among the top hedge funds, with the largest 50 holders (of nearly 700 funds analysed) possessing 55% of the total $760bn equities volume. The largest 100 holders had 71% of the total.

Although much news is made of how dominant the largest hedge funds are in their community, these proportions were not very different to the equivalent figures for the 100 largest institutions overall, as ranked by equity assets.

The largest 50 institutions – headed by Fidelity Management & Research Co with $544bn of top holdings in shares – commanded 60% of the total institutional equity ownership (of $8.79trn) , while the largest 100 comprised 74% of all ownership.

Goldman Sachs noted that 13F filings detailing top 10 positions did not have to include non-US shares.


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