Analysis Shows Hedge Fund Industry is Booming

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.