US Remains Center of Hedge Fund Universe

Home to more managers, investors, and capital than any other region, the US remains the center of the hedge fund universe, holding 72% of the approximate $3.6 trillion in global assets as of the end of May, according to a report from data and intelligence provider Preqin. 

Despite growing hedge fund activity in other regions, the US accounts for 3,405 of the 5,523 institutional investors active in hedge funds, and 3,319 of the 5,383 active hedge fund managers tracked by Preqin.

Total hedge fund assets managed within the US climbed to $2.57 trillion in December, up 8% from $2.37 trillion the previous year, according to the report, as US-based hedge funds recorded 12 months of net positive returns in 2017.

Preqin said the US is also home to 62% of all institutions actively investing in hedge funds, which collectively had invested $1.15 trillion in the asset class as of December 2017.

The report also found that most investor types have invested more capital in hedge funds over recent years, with only sovereign wealth funds, insurance companies, and asset managers reducing their aggregate allocations.  

Public pensions remain the largest allocators to hedge funds, contributing almost half of all institutional capital invested in the asset class by US-based institutional investors with $302 billion. Preqin said that despite high-profile redemptions taking effect, this total has risen every year since 2013.

New York dominates the US hedge fund industry, representing 34% of global industry assets under management, and 47% of all US-based hedge funds. Investors based in New York currently allocate an average of 21.4% of their total assets to hedge funds.

Although the state alone holds $1.24 trillion in hedge fund assets, or 34% of the global total, US “participation in the industry is widespread … every state has at least one active institutional investor in hedge funds, and 48 out of 50 states are home to at least one hedge fund manager,” Amy Bensted, Preqin’s head of hedge funds, said in a release. “With so much of the industry located in the US, the development of the industry here is likely to dictate growth across the globe.”

Blackstone Alternative Asset Management is the largest fund of hedge funds manager in the world, managing $75 billion as of May. Single-manager hedge funds account for more than three-quarters (76%) of US-based hedge funds, with funds of hedge funds, managed futures/CTAs, and liquid alternative structures representing 13%, 6% and 3%, respectively.