Investment

Analysis Shows Hedge Fund Industry is Booming

Published

3 years ago

March 22, 2022

Investors King Contributor

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

British International Investment and Ecobank Sierra Leone Sign $25 Million Risk Sharing Agreement to Boost Private Sector Growth

Published

4 days ago

October 7, 2024

Samed Olukoya

British International Investment (BII), the UK’s development finance institution and impact investor, today announced a $25 million risk sharing facility with Ecobank Sierra Leone to boost private sector growth in high-impact sectors of the economy.

The risk sharing facility, which includes a comprehensive technical assistance programme, will support Ecobank to increase lending to ambitious businesses in a frontier market where economic growth is hampered by lack of capital and investment.

The private sector is crucial to Sierra Leone’s economy and mainly comprises small and medium-sized enterprises (SMEs) who provide employment for about 70 per cent of the population. However, they struggle to gain access to capital due to various factors including limited availability of suitable financial products, high collateral requirements, high interest rates and the prevalence of short-term loans.

The new facility will support local currency lending, demonstrating BII’s ability to act as the first mover in frontier markets and drive impact through pioneering risk navigation strategies. The investment will help Ecobank Sierra Leone to grow its loan book by increasing credit limits and extend lending tenors to up to five years, which are not otherwise available in the market. This is expected to boost business growth, create more jobs and increase private sector contribution to Sierra Leone’s economy.

The transaction marks a significant milestone as the first investment under the Africa Resilience Investment Accelerator (ARIA), which is a collaborative initiative launched by BII and co-funded with FMO, the Dutch entrepreneurial development bank, to boost investment in frontier markets such as Sierra Leone.

The Sierra Leone economy faces challenges including a depreciating currency driven by high inflation, a large trade deficit due to over-reliance on imports, and insufficient investment in infrastructure and services. BII’s investment aims to spur economic growth and development by targeting critical sectors including renewable energy, agriculture, agro-processing, infrastructure and manufacturing.

The announcement builds on a $50 million trade finance facility between BII and Ecobank in 2021, which helped the bank to deepen its reach across Africa and support supply chains in frontier markets such as Burkina Faso, Chad and Togo.

UK Minister for Development, Anneliese Dodds said: “I am delighted to see BII announce this new risk sharing facility with Ecobank Sierra Leone. This agreement will support local currency lending, bringing much-needed capital into sectors with a high development impact, thereby contributing to job creation and economic growth. This is yet another example of BII innovating to address risks and enable development in frontier markets.”

Samir Abhyankar, MD and Head of Financial Services, BII, commented: “The signing of this agreement with Ecobank Sierra Leone underscores BII’s pioneering role to lead investments in countries that are often overlooked by investors. The facility will be a game-changer for Sierra Leone, providing much-needed capital for ambitious local businesses to accelerate their growth, spur job creation and deepen impact. It’s an example of BII innovating and working with partners to help address pressing challenges where it matters the most.”

Sebastian Ashong-Katai, Managing Director, Ecobank Sierra Leone, said: “We are delighted to have secured the support of British International Investment in boosting Ecobank’s vital lending capacity for Sierra Leone businesses who are the engine room for our country’s growth, economic development and employment. This further strengthens our intent to be the bank of choice for Sierra Leone’s businesses and leverages our delivery of world class products, services, solutions, borderless digital pan-African platform and business skills training which are designed to support them in further growing their businesses.”

Alex Kucharski, BII’s Head of West Africa for ARIA, added: “ARIA aims to unlock investment in Sierra Leone, a market full of potential. We are delighted to have enabled the investment by British International Investment into Ecobank Sierra Leone, which will bring much needed growth capital to underserved businesses in the country, showing that more investment is possible.”

Investment

Nigeria Targets $10 Billion in Deep-Water Gas Investments with New Tax Incentives

Published

1 week ago

October 4, 2024

Samed Olukoya

The Federal Government has perfected plans to attract $10 billion in new investments in deep-water gas exploration through tax breaks and other incentives.

In the new policy framework forwarded to the National Assembly to be passed into law, the Federal Executive Council (FEC) said about 67% of Nigeria’s offshore gas sector remains undeveloped.

However, the FEC believes that by providing tax credits for new investments in the sector, more global players can be lured to the untapped sector.

In a statement published by Olu Verheijen, special adviser to the president, the government also plans a gas-production allowance for greenfield developments in onshore and shallow-water locations.

“We intend to unlock between $5 billion to $10 billion of new investments in Nigeria in the near- to medium-term,” Verheijen said.

According to Verheijen, who also heads the Energy Office of the Presidency, once this is passed into, it would fast-track the development of natural gas, deepen gas usage for transportation and bolster energy security.

It was estimated that global businesses will be spending about $90 billion on deep-water oil and gas projects in coming years, this, Verheijen said is what the country is targeting.

“This is the pool of funds that our reforms are targeting,” she said.

The president has implemented a series of reforms to rejig the nation’s economy and set Nigeria on the right path. In a recent broadcast, the president claimed these reforms have attracted over $30 billion in foreign direct investment.

Despite the changes made to core policies, Nigerians are yet to see its results as earnings remained low and inflation rate remained at an all-time high while economic uncertainties in the face of chronic Naira depreciation have eroded the profitability of businesses.

Investment

FG Secures $200m Afreximbank Investment For Creative Industry

Published

1 week ago

October 3, 2024

Bassey Marshall

The African Export-Import Bank (Afreximbank) has announced plans to invest a sum of $200 million in the Nigerian creative industry.

The latest development was made known in New York during the “Destination 2030: Nigeria Everywhere” event held at the United Nations General Assembly (UNGA).

Speaking at the event which was organized by Nigeria’s Ministry of Arts, Culture, and the Creative Economy, the President and Chairman of Afreximbank, Professor Benedict Oramah, said that the funding was in line with the bank’s commitment to boost the nation’s creative industry.

He revealed that the latest move, aimed at building a foundation for sustainable economic growth will position the nation as a global leader in the global creative industry.

He said, “investing in the creative industries is about building a foundation for sustainable economic growth and positioning Africa as a global cultural leader.”

Speaking further, the Minister of Arts, Culture, and the Creative Economy, Hannatu Musawa, called for the support of investors, development partners, and global partners in the creation of 2 million jobs.

She described the event as a roadmap to transforming Nigeria into a global cultural powerhouse.

She stated, “Destination 2030: Nigeria Everywhere is our roadmap to transforming Nigeria into a global cultural powerhouse. To fully realize this vision, I urge investors, development partners, and global collaborators to join us in creating 2 million jobs and contributing $100 billion to the national GDP.”

Investors King learned that after the main event of UNGA, Musawa engaged in talks with other investors to boost Nigeria’s cultural and creative industry.

She engaged in discussions with the UN Deputy Secretary-General Amina Mohammed, the Executive Director of the UN Office for Partnerships, U.S. State Department Under Secretary for Public Diplomacy, Lee Satterfield, and Faisal Alibrahim, Saudi Arabia’s Minister of Economy and Planning.