Home to some of the world’s largest and most prolific investors, the US represents an important source of capital for hedge fund managers. With US-based institutional investors accounting for 63% of hedge fund investors tracked by Preqin, they undoubtedly have a significant presence in the hedge fund industry. Preqin’s Hedge Fund Investor Profiles tracks 2,976 US-based investors which currently invest in hedge funds. Here, we will look at the 50 largest US-based investors on Preqin’s Hedge Fund Investor Profiles based on their current hedge fund allocations, and identify what appetite and characteristics are driving these large allocations.
The 50 largest US-based hedge fund investors have aggregate assets under management of approximately $2.8tn. They also represent a combined $206bn invested in the asset class which accounts for 37% of all US capital allocated to hedge funds. Out of the top 50 US-based hedge fund investors, 18 are public pension funds and 12 are private sector pension funds, while endowments (7), asset managers (3) and family offices (3) complete the top five institutions. The Teacher Retirement System of Texas currently allocates over $11.4bn to hedge funds, which makes it the largest US-based allocator in the asset class.
New York is home to the largest number of these leading hedge fund investors, with six of the top 50 institutional allocators to the asset class based in the state. Michigan (5), Texas (4), California (4) and Connecticut (3) round off the remaining top five states that are the leading allocators to hedge funds.
These large US-based hedge fund investors have been committed to the asset class for a significant period of time; on average, the group began investing in hedge funds over 12 years ago, in comparison to nine years for all other US-based institutional investors.
The sheer size of some types of institutional investors, such as private and public pension funds, result in a greater amount of capital allocated to hedge funds as part of their overall alternative investment strategy. Other institutions that form the top 50 US-based investors allocate greater amounts of their portfolio to the asset class. As noted in a previous blog, despite concerns from some quarters that a number of US pension schemes may be reining in on hedge fund investments, this group in general look set to continue to invest heavily in the asset class going forwards; 60% are under their targeted exposure to the asset class. Therefore, it is likely that this group will continue to have a significant influence on the growth of the industry in the near future.