London and New York are two of the major hubs in the financial industry with a vast presence in the institutional hedge fund investor industry, as outlined in Preqin’s factsheets, The Hedge Fund Industry in London - August 2015 and The Hedge Fund Industry in New York City - August 2015. Preqin’s Hedge Fund Investor Profiles online service currently tracks 244 London-based investors and 436 based in New York City, which together constitute approximately 11% of the total capital invested in hedge funds by institutional investors worldwide. Looking at the two cities individually, London-based investors on average allocate 12% of their portfolio to hedge funds, whereas their New York City counterparts allocate 21% on average.
The breakdown of hedge fund investors by type is relatively similar for the two cities, with fund of hedge funds managers forming 23% and 31% of investors based in London and New York City respectively. Foundations and private sector pension funds are also relatively significant by number, with foundations accounting for 14% and 21% of investors respectively for each city. The only significant difference in the breakdown of investor types is the prominence of wealth managers in London: 19% of London-based hedge fund investors are wealth managers, while they account for only 6% of investors based in The Big Apple.
Long/short equity is the most commonly sought-after strategy for both sets of investors in their plans for the next 12 months, with 53% of London-based investors and 50% of those based in New York City utilizing a long/short fund strategy. Macro is also a commonly utilized strategy, although it appears to be slightly more favoured by London-based investors (37%) compared to 31% of investors from New York City. Interestingly, London-based investors are more interested in event driven strategies (32%) over the next 12 months than their New York City-based counterparts (19%).
Preqin’s data shows that London- and New York City-based investors follow a similar pattern in their attitudes towards hedge fund investment. Despite New York City accommodating almost twice the number of investors as London, based on the types of active investors in these hubs and their strategic and structural preferences, the two cities take very similar stances regarding hedge fund investment. However, the onset of regulation such as the AIFMD is beginning to shape the geographical preferences of these investors and may also impact their strategic preferences.