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Analysis Shows Hedge Fund Industry is Booming

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Highlights 

  • 67% of all hedge funds globally and 70% of all new fund launches are US-based
  • Crypto hedge funds appear for the first time in the top 10 of hedge fund strategies
  • 22% of hedge funds apply a purely quantitative investment process and ca. 2% use artificial intelligence

An in-depth analysis compiled by quant technologies provider SigTech, reports that after continued expansion in 2021, there are currently 27,255 active hedge funds globally.

Geographical breakdown

The hedge fund industry remains dominated by the US market, which is home to 67% of all hedge funds globally, followed by 9% in the UK, 4% in China, and ca. 2% each in Brazil, Canada and Switzerland.

When it comes to the cities that have the largest concentration of hedge funds, unsurprisingly New York is the clear leader with nearly 7,000 funds  (25.0% of total), followed by London with over 2,000 (8.2%), and Hong Kong with nearly 1,000 (3.6%).

Top 10 cities                            No. of hedge funds                  % of total hedge funds

New York                                            6,801                                       25.0%

London                                                2,230                                       8.2%

Hong Kong                                          978                                          3.6%

Boston                                                 931                                          3.4%

Chicago                                               786                                          2.9%

Greenwich (USA)                                682                                          2.5%

San Francisco                                      677                                          2.5%

Los Angeles                                         482                                          1.8%

São Paulo                                             448                                          1.6%

Toronto                                                395                                          1.4%

 

Daniel Leveau, VP Investor Solutions at SigTech, comments: “Our analysis reveals a strong and vibrant global hedge fund industry. Despite a healthy growth in emerging hedge fund centers,  US-based managers continued to dominate the industry, both in absolute numbers and in terms of new fund launches.

Strategy breakdown

The most popular hedge fund strategy is Equity Long/Short, followed by Multi Strategy, Equities others (e.g., long bias, short bias), Fixed Income Credit and Event Driven.  The fast-growing sub-strategy Crypto now makes up ca. 3% of all hedge funds. Also noteworthy is that 22% of the world’s hedge funds apply a purely quantitative investment process and ca. 2% claim to use artificial intelligence.

Top 10 hedge fund strategies               No. of hedge funds      % of total hedge fund strategies

Equity Long/Short                                            6,925                                       26.0%

Multi Strategy                                                  4,899                                       18.4%

Equities others                                                  3,120                                       11.7%

Fixed Income Credit                                        3,004                                       11.3%

Event Driven                                                   2,004                                       7.5%

Managed Futures                                             1,780                                       6.7%

Macro                                                              1,450                                       5.4%

Relative Value                                                 1,377                                       5.2%

Alternative Risk Premia                                   997                                          3.7%

Crypto                                                             774                                          2.9%

New hedge fund launches

On the backdrop of a strong performing hedge fund sector, new fund launches remain strong, with nearly 2,000 new launches per year on average since 2019. Of the 5,500 new hedge funds launched since 2019, 70.2% are based in the US, 9.3% in the UK and 5.2% in China.

Top 5 countries for hedge fund

launches since 2019                            No. of hedge fund launches                % of total

USA                                                                 3,859                                       70.2%

UK                                                                   512                                          9.3%

China                                                               287                                          5.2%

Brazil                                                               127                                          2.3%

Canada                                                            101                                          1.8%

 

The most popular strategy for these new funds is Equity Long/Short, followed by Fixed Income Credit, Equity others (e.g. long bias, short bias) and Multi Strategy.

Top 10 hedge fund strategies               No. of hedge funds                  % of total

among fund launches

Equity Long/Short                                            1,059                           19.3%

Fixed Income Credit                                        515                              9.4%

Equity others                                                   394                              7.2%

Multi Strategy                                                  348                              6.3%

Crypto                                                             310                              5.6%

Event Driven                                                   244                              4.4%

Relative Value                                                 241                              4.4%

Macro                                                              238                              4.3%

Managed Futures                                             133                              2.4%

Alternative Risk Premia                                   38                                0.7%

Leveau adds: “The robust level of new hedge fund launches reflects a sustained strong demand from investors for innovative and uncorrelated investment strategies to meet return expectations in an increasingly challenging market environment. Hedge fund growth shows no signs of abating, fuelled by the ever-increasing investment opportunities in the market, and the growth of new data and tools available to these funds.”

Crypto hedge funds on the rise

In 2021, a record number of 171 crypto hedge funds were launched. In total, there are now 774 hedge funds focused on crypto, with the US again being the driver of innovation with 80% of these funds domiciled in the US.

Daniel Leveau says, “We are investing heavily in our quant technology platform to satisfy the strong demand from hedge funds looking to accelerate their data-driven investment processes.

Alongside the growing hedge-fund community, SigTech enjoyed strong growth in 2021. Clients with a combined AUM of over $5 trillion are now using our platform, including some of the world’s leading hedge funds, as well as recently launched start-up systematic funds.”

About SigTech

SigTech offers a future-proof quant trading platform to global investors. Cloud-hosted and Python-based, the platform integrates a next-gen back test engine and analytics with curated datasets covering equity, rates, FX, commodity, and volatility. SigTech eliminates the expensive upfront costs of infrastructure build-out, giving clients an edge in alpha generation from day one.

The SigTech platform was originally built over seven years to manage systematic investments at Brevan Howard, which remains a SigTech client today. After the spinoff into an independent company in 2019, the team has grown substantially and established SigTech as the leading provider of quant technologies.

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Investment

China’s State-Owned Lenders Allocate $8 Billion to Revitalize Property Market

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General Images Of Residential Property

China’s state-owned lenders have committed a substantial $8 billion in loans to rejuvenate the country’s beleaguered property market, aligning with Beijing’s directives to bolster the sector.

Agricultural Bank of China Ltd. disclosed approving over 40 billion yuan of loans for real estate projects on predefined white lists, signaling a proactive approach towards supporting the housing market’s recovery.

China Construction Bank Corp. also joined the effort, extending 3 billion yuan to five property projects, with plans to greenlight over 20 billion yuan in loans soon.

Industrial & Commercial Bank of China Ltd. and Bank of China Ltd. are among the institutions offering financing assistance, although the exact loan amounts remain undisclosed.

This initiative follows Beijing’s recent call for local authorities to enhance financing support for developers and curate lists of eligible projects.

In response, the big four state lenders pledged to meet reasonable financing demands from developers and projects identified under the coordination mechanism.

However, China’s property market faces challenges despite these measures. New home sales plummeted 34.2% year-on-year, underscoring the ongoing slowdown.

While existing home transactions surged during the Spring Festival holiday, new home sales remained subdued, prompting a cautious outlook among buyers.

The infusion of $8 billion aims to instill confidence and stimulate activity in the property sector, potentially heralding a gradual recovery amid persisting market uncertainties.

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Investment

BUA Foods Invests $200m in Lafiagi Sugar Estate Expansion

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BUA Foods, a leading Nigerian food conglomerate, has announced an investment of $200 million in its Lafiagi Sugar Estate located in Kwara State.

The Managing Director of BUA Foods, Ayodele Abioye, revealed this during a press briefing held at the company’s headquarters in Lagos.

Abioye said the leading company plans to enhance its integrated sugar estate project to reduce reliance on foreign exchange for raw materials.

The project includes the construction of a sugar refinery, ethanol plant, and supporting infrastructure aimed at bolstering local production.

The Lafiagi Sugar Estate spans approximately 20,000 hectares and integrates various components such as a sugar refinery with a daily capacity of 20,000 metric tonnes, along with an industrial ethanol plant.

Abioye underscored the importance of reducing dependency on forex for sourcing raw materials, citing challenges faced due to Nigeria’s lack of industrial agricultural production of sugarcane.

BUA Foods aims to bolster its local supply chain by engaging with communities and establishing partnerships in agriculture.

Abioye emphasized the need for sustainable practices and community involvement in fostering self-sufficiency.

The company’s investment reflects its dedication to expanding domestic production capabilities and driving economic growth in Nigeria’s agricultural sector.

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Treasury Bills

Nigeria’s One-Year Treasury Bill Oversubscribed by 300%

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FG Borrows

Nigeria’s one-year treasury bill was oversubscribed by 300% during the recent Primary Market Auction conducted by the Central Bank of Nigeria (CBN) on Wednesday.

The auction, aimed at rolling over maturing Nigerian Treasury Bills worth N1 trillion, saw unprecedented demand for the one-year T-bill.

Investors offered a total of N1.87 trillion for the N600 billion on offer, indicating a significant appetite for government securities. Out of the total subscriptions, N908.75 billion was allotted, with stop rates set at 19%.

The auction covered maturities across three different tenors: 91-day, 182-day, and 364-day bills, with varying amounts on offer.

While the 91-day bill received N39.90 billion in offers, all were sold, and the 182-day bill garnered N76.83 billion subscriptions, out of which N51.35 billion was allotted.

Managing Director of Arthur Steven Asset Management, Tunde Amolegbe, attributed the remarkable performance of the one-year bills to investor confidence in the current government and its reform initiatives.

He highlighted investors’ preference for higher rates due to signals from the CBN indicating tightening monetary policies amid accelerating inflation.

Experts view the oversubscription as a testament to investors’ trust in the government’s reforms and management of the country’s debt obligations.

The auction reflects a move by the CBN to address liquidity in the financial system while managing Nigeria’s debt obligations effectively.

The significant oversubscription signals robust investor confidence and highlights the attractiveness of Nigerian government securities despite prevailing economic challenges.

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