Investment

Analysis Shows Hedge Fund Industry is Booming

Published

2 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

Minister Accuses Past NCDMB Leadership of Squandering $500m on Unproductive Projects

Published

3 days ago

April 22, 2024

Samed Olukoya

The Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, has accused the former executives of the Nigerian Content Development and Monitoring Board (NCDMB) of mismanaging a whopping $500 million on projects deemed unproductive.

Speaking at a dinner hosted by The Petroleum Club in Lagos, Lokpobiri minced no words as he shed light on what he described as egregious financial mismanagement within the organization.

Lokpobiri, during the interactive session, alleged that substantial sums were squandered on ventures that yielded little to no tangible results.

Among the projects cited was the infamous Brass modular refinery in Bayelsa State, for which a staggering $35 million was purportedly disbursed without any discernible progress.

Similarly, Lokpobiri raised concerns about a $20 million investment in a fertiliser factory, questioning its whereabouts and efficacy.

The minister’s accusations didn’t end there. He underscored what he termed the imprudent disbursement of funds, highlighting instances where significant amounts were released in lump sums against professional advice.

Lokpobiri stressed the need for a comprehensive review of these investments, lamenting the magnitude of the financial losses incurred.

Furthermore, Lokpobiri pointed fingers at the mismanagement of loans totaling approximately $350 million, which were intended to support investors.

According to him, a staggering 90% of these loans ended up as non-performing, exacerbating the financial hemorrhage experienced by the NCDMB.

Addressing the crisis between himself and the incumbent NCDMB boss, Felix Ogbe, Lokpobiri clarified that his intervention was grounded in the oversight responsibilities vested in him as the chairman of the council overseeing the NCDMB.

He stated the importance of due diligence in governance and reiterated his commitment to ensuring transparency and accountability within the organization.

In response to Lokpobiri’s accusations, the immediate past Executive Secretary of the NCDMB, Simbi Wabote, vehemently refuted the allegations, asserting that they lacked substantiation.

Wabote defended the integrity of the Nigerian Content Intervention Fund, hailing it as a pivotal initiative with an impressive 96% payback rate.

Wabote also defended the NCDMB’s investment decisions, citing instances of successful ventures such as the equity investment in Waltersmith’s modular refinery, which has shown promising returns.

He attributed challenges faced by certain projects to external factors and legal disputes, maintaining the organization’s commitment to prudent financial management.

As the allegations continue to reverberate across the industry, stakeholders await the outcome of the government’s review, which could potentially reshape the trajectory of the NCDMB and its approach to investment and governance.

Investment

SEC Brings N2.36tn in Funds Under Custody with New Guidelines

Published

3 days ago

April 22, 2024

Samed Olukoya

The Securities and Exchange Commission (SEC) has successfully brought about N2.36 trillion in discretionary and non-discretionary funds under custody.

This achievement follows the implementation of updated guidelines for Collective Investment Schemes (CIS) in Nigeria.

Last December, the SEC proposed amendments to address grievances within the Collective Investment Scheme segment of the capital market.

These amendments sought to enhance investor safeguards and address concerns raised by market participants.

In a notice published on its website titled ‘Exposure Of New And Sundry Amendments To The Rules And Regulations Of The Commission,’ the SEC outlined the new regulatory changes.

Among these changes was the requirement for all CIS funds, including those in discretionary and non-discretionary windows, to be placed under custody.

This move was aimed at strengthening investor protection and mitigating risks associated with fund management.

Dr. Okey Umeano, the Chief Economist at SEC, provided insights into the impact of these regulatory updates during a media briefing after the first-quarter Capital Market Committee meeting.

He highlighted that prior to the regulatory amendments, only funds designated as Collective Investment Schemes were subject to custody.

However, with the new guidelines in place, all funds, regardless of their discretionary or non-discretionary nature, are now required to be custodied.

Umeano revealed that the SEC conducted inspections to ensure compliance with the new regulations, resulting in N2.36 trillion of discretionary and non-discretionary funds being brought under custody.

This move underscores the SEC’s commitment to safeguarding investor interests and fostering trust in the capital market ecosystem.

Former SEC Director-General, Lamido Yuguda, emphasized the importance of segregating asset management and custody functions to mitigate risks.

He noted that while the separation of these functions was standard practice for public CIS products, it was not uniformly applied to bilateral arrangements.

However, with the implementation of the new rules, all investment management activities, whether in public CIS or bilateral spaces, are mandated to be in custody.

Yuguda stressed that the objective of these regulatory changes is to improve trust, protect investors’ assets, and bolster market confidence.

By ensuring that investment management activities are segregated, with custody handled by duly licensed custodians, the SEC aims to create a more resilient and transparent capital market environment.

Investment

Lagos State Government Set to Demolish $200 Million Landmark Beach Resort

Published

3 weeks ago

April 6, 2024

Samed Olukoya

The Lagos State Government has issued a demolition warning to the proprietor of the $200 million Landmark Beach Resort, a renowned tourist destination in the region.

The resort nestled along the picturesque coastline faces imminent destruction to make way for the construction of a 700-kilometer coastal road linking Lagos with Calabar.

Paul Onwuanibe, the 58-year-old owner of the Landmark Beach Resort, revealed that he received a notice in late March instructing him to vacate the premises within seven days to facilitate the impending demolition.

The resort, which spans a vast expanse of land and hosts over 80 businesses, is a hub of economic activity, sustaining over 4,000 jobs directly. Also, it contributes more than N2 billion in taxes annually.

The news of the resort’s potential demolition has sparked concerns among investors and stakeholders in the tourism sector. Onwuanibe expressed dismay at the government’s decision, highlighting the substantial investments made in developing the resort’s infrastructure.

He explained that the planned demolition would not only lead to significant financial losses but also jeopardize the livelihoods of thousands of employees and businesses associated with the resort.

The Landmark Beach Resort is a popular tourist destination, attracting approximately one million visitors annually, both local and international. Its unique amenities, including a mini-golf course, beach soccer field, and volleyball and basketball courts, make it a favorite among tourists seeking leisure and recreation.

The prospect of the resort’s demolition has triggered widespread panic among international and domestic investors associated with the Landmark Group. Many are now considering withdrawing their investments, citing concerns about the viability of the business without its flagship beach resort.

The Lagos State Government’s decision to proceed with the demolition is part of its broader plan to construct the Lagos-Calabar coastal highway, a 700-kilometer roadway connecting Lagos to Calabar.

The government had earlier announced its intention to remove all “illegal” constructions along the planned route of the highway, including the Landmark Beach Resort.