NEWS & INSIGHTS


Tom Kreitler in Rachel Levy of FundFire’s, “AQR, Viking See Asset Gains as Bridgewater, Och-Ziff Drop”

AQR, Viking See Asset Gains as Bridgewater, Och-Ziff Drop
By Rachael Levy – FundFIRE
February 3, 2016

Some of the biggest U.S.-based hedge funds are rapidly increasing assets – among them AQR Capital Management and Izzy Englander’s Millennium Management – though a few are seeing mild drops in assets under management, according to data from Preqin and figures provided by the firms.

Overall, most of the top managers added assets over the past two years. That has occurred as the $3 trillion hedge fund industry stayed flat from 2014 to 2015, with redemptions and performance drops mostly offsetting the $44.6 billion investors added to hedge funds, according to eVestment data.

AQR saw one of the highest increases in assets, adding more than $20 billion to its hedge funds in two years. The firm managed $23.5 billion in hedge fund assets as of September 2013, but that figure rose to $43.9 billion by last September, according to figures provided by a spokesman.

Adding AQR’s expansive liquid alts program magnifies those asset numbers, with $49.3 billion under management as of September 2013, which rose to $74 billion this past September, according to Preqin data.

AQR was posting strong returns on both its private fund and retail fund sides last year, and its retail managed futures fund pulled in nearly a third of the assets for its industry-wide category, as reported. A spokesman for AQR declined to comment on the firm’s asset growth.

Millennium also showed a strong increase, seeing its assets rise about $10 billion over two years. The firm had $21.1 billion under management in December 2013 and $31.8 billion as of September, according to Preqin.

Viking Global Investors is up more than $5 billion, with $24.8 billion under management in September 2013 rising to $31 billion as of last September, according to Preqin.

Ray Dalio’s Bridgewater Associates remains the behemoth of the industry, leading the pack with more than twice the assets of its closest rival, AQR. But the firm saw assets drop slightly, with its $155.3 billion under management in September 2014 dropping a year later to $151.2 billion, according to Preqin data.

Bridgewater says that while the amount of its investor assets has decreased, its assets including leverage have increased over the same 2014 to 2015 period, from $159.9 billion to $161.9 billion.

Och-Ziff Capital Management is up about $7 billion since 2013, though it saw a slight drop in the past year, with $46.8 billion under management in September 2014 declining to $44.6 billion a year later, according to figures provided by the firm.

When large managers lose capital, it is difficult to track where those assets land. But some may end up flowing to smaller, more niche strategies, says Peter Pavlina, managing partner at third party marketer Hamersley Partners.

“The first question is why are they being redeemed in the first place? If it’s performance… then maybe [the investor] is looking at swapping out one manager into another,” he says.

Smaller and mid-sized niche strategies should position themselves to win assets that could trickle down, particularly when investors are shifting their asset allocation, Pavlina says.

“It won’t always be the case, but at the margin, that will be helpful to firms like us, where more niche strategies are going to be more in demand,” he says.

While oftentimes the money gets rebalanced among marquee players, Pavlina adds, “there’s no question in my mind that some of that… will trickle down to lesser known, uncorrelated, niche strategies,” he says.

Overall, investors are shifting away from directional strategies to lower volatility and relative value managers, as investors’ return expectations have dipped following a tough 2015, says Tom Kreitler, partner at capital raiser Eaton Partners. And that, too, can benefit smaller managers.

“It’s difficult for the very large managers sometimes to be nimble enough to generate returns, particularly in difficult markets,” Kreitler says. “Some capital might be flowing from the very large folks that have struggled a little to slightly smaller managers who may be perceived as having a niche or sector expertise, or at least having a little more nimbleness.”

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