The US market is established as the global centre for hedge fund activity both in terms of numbers of funds as well as investors active in the asset class. With such a broad range of funds and experienced managers in the US , many US based institutions choose to just invest domestically. However increasingly we are witnessing investors looking further afield when selecting new funds to add to their portfolios and today 17% of all US investors state Europe as an active preference when searching for new hedge fund opportunities. Of all US investors which currently invest in European fund managers, European investments form 20% of their hedge fund portfolio. Most commonly US investors are looking to make direct investments, with 68% of all US investments in Europe being in single manager vehicles.
UK fund managers are very attractive to the US market – the lack of language barrier, developed hedge fund market and wide choice of funds in the UK allows US institutional investors to satisfy their search for European vehicles with fewer logistical and due diligence issues.
US investors look to take advantage of different global market hedging opportunities by investing in Europe and long/short equity funds are the predominant fund choice for US investors when selecting European funds. However a variety of European fund strategies are commonly used by US investors including macro, multi-strategy, distressed, CTA and event driven, which suggests that many European managers will benefit from marketing their vehicles to investors in the US.
It is largely the most experienced investors in the US as well as the largest allocators to hedge funds which are looking outside their domestic region for new hedge fund opportunities. Fund of hedge funds, public sector pension funds and endowments are all important sources of US capital for the European fund managers with newer, less sophisticated groups of investors such as private sector pension funds investing in Europe to a lesser extent.
Preqin tracks 212 US institutional investors with a current appetite for European fund vehicles. This includes 66 funds of hedge funds, 51 endowment plans, 41 public sector pension funds and 24 family offices and foundations. For more information on these investors and Hedge Fund Investor Profiles please click here to arrange a demo