New York-Based Private Wealth Firms in Hedge Funds – March 2016

by Matthew Rautionmaa

  • 04 Mar 2016
  • HF

According to Preqin’s Hedge Fund Investor Profiles database on Hedge Fund Online, private wealth institutions represent nearly a fifth of the 4,935 institutional investors in hedge funds we track, with New York home to one in nine of these private wealth firms. Managers looking to secure private wealth capital must be aware of the differing hedge fund investment preferences of New York-based private wealth firms compared with other hedge fund investors around the world.

New York has a higher concentration of single-family offices investing in hedge funds (39%) as compared to the global average (23%), the same portion of multi-family offices (26%) and a lower proportion of wealth managers: 34% of the New York-based private wealth population are wealth managers, compared with 51% in other regions.

Due to the high concentration of high-net-worth individuals in New York, the median assets under management (AUM) of a New York-based private wealth firm is higher than that of a private wealth firm based elsewhere ($1.3bn and $1.1bn respectively). Furthermore, New York-based firms allocate, on average, a higher percentage of their total assets to hedge funds (22.1%) than the global average (18.2%). It is interesting to note that despite higher AUM and a larger allocation to hedge funds, private wealth investors in both groups maintain a similar number of hedge funds within their portfolios: New York-based investors hold 19 hedge funds in their portfolio compared to 20 for private wealth firms based elsewhere. However, this may indicate that New York-based firms, on average, commit more capital per hedge fund investment.

Structurally, both groups largely favour commingled funds, however, institutions outside New York are more open to liquid alternatives than their New York-based counterparts: 11% of firms outside New York have a preference for listed funds, alternative mutual funds or UCITS, compared with only 4% of New York-based firms. When comparing fund type preferences, a larger proportion of New York-based private wealth firms target direct investments (69%) than firms based elsewhere (61%), while a smaller proportion have a preference for funds of hedge funds (4% and 9% respectively), indicative of the level of expertise of New York-based private wealth firms.

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