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Hedge Fund Investment Strategies of US-Based Wealth Managers – February 2015

by Matthew Rautionmaa

  • 10 Feb 2015
  • HF

Preqin’s Hedge Fund Investor Profiles online service currently tracks 221 US-based wealth managers. The chart below outlines the preferred hedge fund strategies of these firms. Over half (57%) of US-based wealth managers have a diversified exposure to hedge funds. Taking into account the findings of a recent Preqin blog post, when we look specifically at strategic preferences we find a similarity between the preferences of Europe- and US-based wealth managers, whose preferences for hedge fund strategies are in almost the same order, with long/short equity and macro the most utilized.

This signifies similar hedge fund investment preferences between investors in two of the world’s largest markets. US-based wealth managers show a strong preference for long/short equity (46%) with a significant drop-off to other hedge fund strategies, which although similarly preferred, are proportionally not as utilized when compared to Europe-based wealth managers. Therefore, US-based wealth managers have more of a focus on long/short equity and utilize all other preferred strategies at a lower rate than Europe-based wealth managers, who tend to vary their focus more equally.

The strong preference for long/short equity could be due to its ability to minimize market exposure against the unpredictability of the global economy. Nineteen percent of US-based wealth managers have a preference for macro funds, likely due to the strategy’s ability to return independently of capital markets. The fact that this is the second most utilized strategy among US-based wealth managers shows their preference for taking advantage of the volatility of certain global equities, currencies and markets. Similarly, 19% have chosen to invest in hedge funds via a long/short credit strategy, which is unsurprising given that exposure to long/short credit is a flexible approach with the potential to profit across a credit cycle – the likely reason behind their decision to invest in the strategy.

Maclendon Wealth Management is a wealth manager that recently spoke with Preqin about its hedge fund investments. The Florida-based firm, which provides wealth preservation, asset management, retirement planning and investment services to high-net-worth individuals and business development companies, has total assets under management of $135mn with a 10% allocation of $13.5mn to the hedge fund asset class. Currently, it invests in North America-based funds employing long/short equity and long/short credit strategies. The wealth manager is considering investing in the next 12 months, depending on its clients’ preferences. 

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