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Large Hedge Funds Lose Assets in 2016, but the Biggest Just Keep Getting Bigger

By NexChange
Hedge Funds


The largest hedge funds in the world had assets under management reductions, according to the latest Absolute Return Billion Dollar Club rankings out Friday. The losses came following legal problems for two large hedge fund managers and performance issues with other hedge funds. While there were hedge fund withdrawals, there were also many funds that posted significant gains in assets under management.

Paul Tudor Jones hedge funds

Paul Tudor Jones witnessed hedge fund withdrawals in 2016. By Hedge Funds ( [CC BY 3.0], via Wikimedia Commons

Big losses from a few big firms bring down large fund assets under management

For the first time since 2008, hedge funds with over $1 billion in assets under management witnessed net outflows in 2016, albeit small. The group of 309 funds that manage $1.88 trillion total lost 0.04% of their assets in 2016.

Several large funds accounted for a major portion of the loss.

Visium Asset Management, once with $7.8 billion under management, closed its doors amid an insider trading and fraudulent valuation investigation and now has less than $1 billion under management, Absolute Returns researcher Miles Kruppa noted in an April 27 report. Likewise, Och-Ziff Capital Management, the largest publicly-traded US hedge fund, lost $11.10 billion in 2016 amid legal troubles with business dealings in Africa. The fund started 2017 with $33.50 billion under management.

Other funds to see withdrawals included York Capital Management, which lost $6.10 billion. The fund posted negative 2015 performance of 14% and was flat in 2016, a year in which The Wall Street Journal reported fund CEO Jamie Dinan said he experienced “his most intense client interactions in years.” That can happen when dramatically underperforming benchmarks.

Another major fund manager suffering performance woes was John Paulson’s Paulson & Company. The fund suffered yet another dreary returns year, down -23.6% in 2016. The fund lost more than half its assets in that year, falling from $9.82 billion to $4.39 billion.

Other major firms to see declines included Tudor Investment Corp, which lost -21% .88% its assets in 2016; Grantham, Mayo, Van Otterloo was down -22.76%; Pershing Square Capital Management was down -23.81%; Eaton Park Capital Management was down -22.22%; Corvex Management was down -28.57%; Convexity Capital Management was down -47.56% in AUM.

Noncorrelated, algorithmic hedge funds biggest winners

Where there were hedge fund losers, there were also many assets under management winners.

While hedge funds over $1 billion suffered slight losses, funds managing over $20 billion grew by $6 percent, led by generally noncorrelated, algorithmic-based hedge funds.

Bridgewater Associates and AQR Capital Management were big winners, gathering $18.1 billion and $22.5 billion respectively. For the first time in Absolute Return’s monitoring, two managers represented 10% of all hedge fund assets, with Bridgewater’s head Ray Dalio and AQR head Cliff Asness taking the honor.

Other firms, many with a managed futures CTA background, were winners.

Renaissance Technologies grew by $12.5 billion, while Two Sigma added $25 billion.

Renaissance launched the market-neutral Renaissance Institutional Diversified Global Equities Fund, which added $2.15 billion to the new money the firm managed. Two Sigma’s trend following Compass strategy delivered offshore investors 10.33% in 2016, according to the HSBC alternatives report. Adding to their 2016 asset gains were allocations of nearly 300 million from the State of Wisconsin Investment Board and Pennsylvania Public School Employees Retirement System, Absolute Returns noted.

“Managed futures funds attracted the most investor interest of any strategy last year, according to the full ­year asset flows report, and algorithm­ driven equity managers like Renaissance Technologies also continued to get bigger,” Kruppa wrote.

Other big hedge fund winners include Centerbridge Partners, which gained 50.65% in assets under management; Bradesco Asset Management DTVM, SPX Capital and J. Safra Asset Management Ltda, all in Brazil, were up 83.66%, 63.76% and 52.93% respectively; Guggenheim Partners was up 37.05%; Paloma Partners was up 52.7%; Lyrical Partners was up 39.29%; Varde Partners was up 49.48%; Zimmer Partners was up 60.9%; and Austin, TX-based Prophet Capital Asset Management was up 45.04% in AUM.

This article was originally published in ValueWalk.

Photo: Graham Leuschke

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