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European Fund of Hedge Funds Managers – January 2013

by Graeme Terry

  • 14 Jan 2013
  • HF

The recent fundraising environment for fund of hedge funds managers in Europe has been challenging but despite this there remains a high number of managers active in the region. Preqin’s Hedge Fund Investor Profiles database currently tracks 232 active European fund of hedge funds managers. The most active countries in this list are the UK, with 34% of all European funds of hedge funds managers listed, Switzerland (30%), France (7%) and Italy (5%).

The size of European fund of hedge funds managers tracked by Preqin varies considerably, from $5mn to upwards of $25bn. These fund managers have a median AUM of $400mn.

Long/short equity remains the most common strategy sought by European funds of hedge funds, with the majority of managers (79%) including some exposure to this strategy in their portfolios. Other common strategies sought by fund managers include: macro (70%), managed futures (65%), event driven (59%), multi-strategy (54%), long/short credit (39%), equity market neutral (38%) and relative value arbitrage (34%). On average these investors invest in a portfolio of 46 hedge funds and therefore many fund of hedge funds managers will look to create a diversified hedge fund portfolio by investing across the broad spectrum of hedge fund styles and strategies.

UCITS-compliant hedge funds have been growing in popularity amongst funds of funds in recent years, and 44% of European funds of hedge funds invest in this structure. Indeed, a number of fund of hedge funds managers have launched funds of UCITS funds which invest solely in UCITS-complaint hedge fund strategies. One such manager is Madrid-based Asesores y Gestores Financieros Fondos, which changed the structure of its fund of hedge funds and now invests solely in UCITS-complaint funds. Managed accounts are slightly less popular, with 24% of managers showing an active interest in this structure.

Overall, the European funds of hedge funds industry has undergone many changes since the financial crisis in 2008. Assets under management declined again in 2012, and currently stands at $280bn, substantially lower than its 2008 peak where it exceeded $535bn. Over 2013, many managers in the region are looking to maintain rather than increase their level of investment;there have also been a number of closures and consolidations over the past year. If fund of hedge funds managers are to continue attracting capital they must listen to the demands of investors and be true alpha providers with flexible and transparent fund of hedge funds solutions. The face of the industry in the region is changing and how managers react will determine the landscape for funds of hedge funds in the next few years.

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