North America-based funds-of-hedge-funds (“FoHFs”) underperformed their counterparts in Europe and Asia in 2015, but still managed to grow their asset base, even as European and Asia-Pacific funds saw their assets decline. These were the main findings of Preqin’s “Fund of Hedge Funds Outlook,” the featured article from the March 2016 Hedge Fund Spotlight, which reports that North America-based FoHFs saw their assets grow by $9 billion in 2015, continuing a streak of asset growth that dates back to 2011. Europe- and Asia-based FoHFs, by contrast, saw their AUM decline by enough to sink the global total by $12 billion.
In terms of 2015 performance, North American FoHFs declined by 0.6%, while Europe- and Asia-based FoHFs posted respective gains of 4.3% and 5.9%. “Further growth in 2016 may be driven largely by performance,” according to Preqin, which also noted that 63% of institutional investors with allocations to FoHFs said their performance expectations had been met in 2015.
North America and “the rest of the world” were the only regions where more FoHF investors increased their allocations than decreased. A plurality (42%) of North America-based investors maintained their allocations, while 34% increased and just 25% decreased. In “the rest of the world,” 46% of FoHF investors increased their allocations, while 38% decreased. By contrast, FoHF investors in Europe and the Asia-Pacific region widely decreased their allocations.
The “rest of the world” category, which accounts for only a tiny sliver of FoHF assets, is predominantly comprised of two countries: Brazil and South America. Preqin reports that those two emerging-market nations account for 78% of “rest of the world” AUM in FoHFs.
FoHF managers introduced just 32 new products in 2015, while liquidating 97 – a deficit of 65. In North America, 16 new FoHFs were introduced and 28 were closed. Europe saw just eight new launches and a whopping 51 closures. The Asia-Pacific region had even fewer launches – only two – versus 13 liquidations. All of these numbers – both launches and closings – are likely understated and should rise when more data become available, according to Preqin.
Of the new FoHFs launched in 2015, the majority (54%) are multi-strategy. Equity strategies were a distant second, accounting for 19% of new launches; and macro strategies were third at 12%. Interestingly, credit strategies – which accounted for just 1% of new launches in 2014 – accounted for 8% in 2015, a massive increase.
Largest Fund-of-Hedge-Fund Managers
Of the top 10 FoHF managers by AUM, nine are U.S.-based. Only #4, the U.K.’s HSBC Alternative Investments, is based outside of North America. All ten are listed below with their AUM as of September 30, unless otherwise noted:
- Blackstone Alternative Asset Management: $68.0 billion
- UBS Hedge Fund Solutions: $35.0 billion
- Goldman Sachs Asset Management: $29.2 billion (as of June 30)
- HSBC Alternative Investments $27.2 billion (as of June 30)
- Grosvenor Capital Management: $27.0 billion
- Morgan Stanley Alternative Investment Partners: $22.3 billion
- Permal Group: $22.3 billion
- BlackRock Alternative Advisors: $21.5 billion
- Mesirow Advanced Strategies: $13.5 billion
- SkyBridge Capital: $12.8 billion
For more information, visit Preqin.com.
Past performance does not necessarily predict future results.
Jason Seagraves contributed to this article.