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. 

Continue browsing industry reports, publications, conferences, blogs and more on Preqin Insights