Europe-Based Asset Managers Show More Appetite for Hedge Funds Compared to their Global Counterparts

by Nat Auld

  • 05 Nov 2014
  • HF

Europe-based asset managers make up 37% of all asset managers investing in hedge funds tracked globally on Preqin’s Hedge Fund Investor Profiles. An important investor group, the average Europe-based asset manager has $46.6bn in assets under management compared to $40.0bn across the rest of the hedge fund investor universe. Europe-based asset managers tend to allocate more capital to the asset class and have more hedge funds in their portfolio compared to their global peers: Europe-based asset managers allocate, on average, 17.5% of their total assets under management to the space and invest in an average of 17 hedge funds. In comparison, global asset managers allocate on average 16.4% of their assets and have 14 hedge funds in their portfolios, indicating that Europe-based asset managers appear to be more inclined to have a higher exposure to hedge funds than their global peers. Moreover, Preqin data shows that Europe-based asset managers have invested in the asset class for longer than their global counterparts, making their first investment on average 13 years ago, compared to nine years ago for all other asset managers worldwide, indicating that Europe-based asset managers are largely more experienced than their peers collectively in this space.

Europe-based asset managers gain exposure to hedge funds via a wide variety of strategies. The most favoured are long/short equity funds, where 65% of the investor group have indicated a preference for this strategy, similar to the trend seen among the rest of asset managers globally (68%). Europe-based asset managers have reported that 40% have a preference for managed futures/CTA funds, compared to 32% of the rest of other asset managers, suggesting that the strong performance of CTA funds over the past year appears to have piqued interest among this investor set. Other strategies that Europe-based asset managers have cited a preference for are multi-strategy (31%), long/short credit (29%), event driven (29%) and equity market neutral funds (24%).

With regard to fund structures, 66% of Europe-based asset managers invest in commingled direct funds, compared to 79% of all other asset managers. UCITS funds are significantly more preferred by Europe-based asset managers, 44% of which are currently investing in or have invested in them, compared to 20% of other asset managers globally. Listed funds are also more favoured by the European contingent than global asset managers, with 12% of the former citing a preference for the structure compared to just 6% of the latter.

Preqin data shows that Europe-based asset managers have a greater appetite for hedge funds compared to their global counterparts, which suggests their confidence could be derived from their experience in investing in the asset class. Europe-based asset managers appear to have some similar preferences to their global counterparts, but there are aspects of their structural and strategic inclinations which show that Europe-based asset managers appear to have different exposures to other aspects of the hedge fund industry. Similarly, newer asset managers globally could be inclined to see further capital flow into hedge funds in the future as they look to diversify within the range of strategies and structures hedge funds can offer, as their confidence and experience within the asset class grows. 

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