29% of all European hedge fund investors on the Preqin database state US-based hedge funds as a preference. As the hub of the hedge fund industry, the US provides diverse investment options for investors. US fund managers can often boast attractive track records and investment experience as well as offering funds which are at the forefront of the asset class. With each of these European investors invested in an average of three US-based hedge fund managers, Europe is a vital source of capital for US hedge fund managers and it is essential for US funds to market their vehicles to these regions if they are to grow in size and global presence.
Countries in which investors are newer to the asset class or have less choice from domestic offerings, such as Portugal and Norway proportionally invest more in US hedge funds. For these countries the US offers a larger choice with regards to strategies and funds. It also gives them the opportunity to invest in more established hedge fund managers with track records proven both before and after the market crisis. Investors in regions such as the UK and Switzerland have a less marked preference for US based hedge funds because they are able to take advantage of the well developed hedge funds industries in their domestic region and therefore have less of a need to look to managers in other countries including the US. However, there is a high density of hedge fund investors in these two countries and together, they represent 61% of all European investors with a preference for US-based managers and are therefore an important source of capital for US hedge fund managers.
By investing in US hedge funds, European investors have the potential to invest in a range of different strategies and are able to build hedge fund portfolios which are diversified not only by style, but by region too. European investors investing in US hedge funds will consider a range of investment strategies, and the US offers much greater choice in terms of hedge fund styles to choose from. US long/short equity funds are particularly popular with European investors with more than half of all investors looking for these funds, surpassing even funds of funds as the most popular choice of US hedge fund for the European investor.
For more information on institutional investors in hedge funds, please see Preqin’s Hedge Investor Profiles online product.