Sizing the 2013 Hedge Fund and Fund of Hedge Fund Universe. evestment Research August 2014

Transcription

1 Sizing the 2013 Hedge Fund and Fund of Hedge Fund Universe evestment Research August 2014

2 Table of Contents Overview and Methodology Summary and Highlights.. 4 Number of Funds... 5 Number of Firms AUM by Fund HF, CTA/MF, and FoHF AUM by Firm Funds by Firm Location Funds by Currency Denomination Funds by Domicile Database Reporting Trends Company Description

3 Overview and Methodology The Sizing the Hedge Fund and Fund of Hedge Fund Universe report draws from the live and graveyard records of nearly 92,000 investment vehicles available across the Barclay CTA, Barclay Hedge Funds, Cogent Hedge Funds, Eurekahedge Global Fund of Funds, Eurekahedge Global Hedge Funds, evestment Alternatives, Mondo Alternative, Morningstar Hedge Funds, Lipper Hedge Funds, and Lipper CTA databases to provide a holistic view of the reporting fund industry. Examining reported data offers valuable insight into the size, scope, and level of transparency within the alternative fund industry. This report is based entirely on voluntary, manager-submitted data to third-party database providers. All data used throughout this report is from early References to 2012 and 2013 data are wholly dependent on available information in live and graveyard datasets in early The report analyzes fund size and type with respect to the number of distinct funds reporting information to commercial databases. Fund types include single-manager hedge funds (HF), commodity trading advisors and managed futures funds (CTA/MF), and funds of hedge funds (FoHF). The report also investigates fund management company locations, currency denominations, domiciles, and reporting trends to third-party information providers. There is a significant number of funds reporting information to multiple database providers, resulting in tens of thousands of duplicate entries upon merger of the datasets into a single universe. We removed duplicate records using a combination of qualitative criteria and quantitative statistics, retaining a single instance of each record for use in this report. From these unique records, we then identified fund share, feeder, currency, and series classes, combined these non-duplicative AUM if the master assets data was missing, and retained a single instance of each rolled-up fund record. Fund AUM not denominated in U.S. Dollars (USD) were converted into USD using the exchange rate in the month of each funds last reported AUM for each annual period. 3

4 Summary and Highlights The available data in early 2014 shows the number of active and reporting funds in 2013 was lower than the number of active and reporting funds in Numerous factors can cause declines, the most prevalent being the real-time realization of terminating funds versus delay in new fund launches reporting to commercial datasets. Declines in the number of funds reporting were more pronounced, on a relative basis, for CTA/MF and FoHFs versus HFs. Part of the YOY decline in the number of CTA/MF funds may have to do with their underperformance in 2013 (HFN CTA/Managed Futures Index returned -1.98% during the year), while part of the decline in the number of FoHFs ceasing to report may have to do with the growth of bespoke portfolios, making reporting to commercial databases seem less practical. The percentage of funds reporting some level of AUM information alongside performance figures rose from 78.37% in 2012 to 81.19% in The proliferation of regulations requiring managers to submit data to authorities in the U.S.A. via Form PF and Europe via the Alternative Investment Fund Managers Directive (AIFMD) may have increased the propensity to supply additional information to commercial databases. Perhaps managers have become more conscientious of investors preferences for greater transparency and the motivation to show up in basic investor searches acted as another catalyst for improved AUM submission. Nearly the entire reported USD billion YOY increase in HF assets was concentrated in the largest funds: those with, or exceeding, USD 750 million in AUM accounted for 100.6% of this reported rise (smaller fund declines were offsetting of the total) and nearly 84% was concentrated in the USD one billion or larger group. This is indicative of institutional investors gravitating towards direct investment with larger, more established managers. New allocations, performance-based gains, and HFs reporting asset information for the first time or improved master asset data helped elevate the total reported AUM. Total reported AUM reached USD trillion for HFs and CTA/MF funds in HFs represented 83.79% of the total, or USD trillion, and CTA/MF funds comprised 16.21%, or USD billion. The reported AUM of HFs expanded by 13.33% YOY but the reported AUM of CTA/MF contracted by 3.09%. A total of 512 HFs and CTA/MF funds reported USD one billion or more in assets in 2013, an increase of 50 funds YOY. These largest funds combined for USD trillion in AUM in 2013 and managed two-thirds (67.89%) of the total USD trillion reported by all HFs and CTA/MF funds. For FoHFs, the total reported AUM was USD billion in 2013 following a YOY contraction of 2.47%. There were 119 FoHFs reporting USD one billion or more in assets for a combined AUM of USD 313 billion. These largest funds managed 63.22% of the total USD billion reported among all FoHFs and were the only FoHF size segment to experience YOY increases in both AUM and number of funds reporting. Reported industry assets were concentrated among the largest HF, CTA/MF, and FoHF firms to a greater degree than they were for the largest funds. Firms with USD one billion or more in HF and CTA/MF assets managed 83.28% (USD trillion) of the combined groups overall 2013 reported AUM compared to 67.89% (USD trillion) managed by the largest individual HF and CTA/MF funds. Firms with the largest FoHF operations managed 80.41% (USD billion) of FoHFs total reported AUM versus 63.22% (USD 313 billion) managed by the largest individual funds. Half of all HF and CTA/MF funds reported that their firms operated within the U.S.A. or the U.K % and 16.44% of firms, respectively. Assets were more concentrated, however, with seventy three cents of every dollar being managed by firms located in the U.S.A. (52.91%) or the U.K. (20.33%). The USD was the most common fund denomination choice in 2013 for HFs, CTA/MF funds, and FoHFs. The most popular domicile locations for HFs, CTA/MF funds, and FoHFs were the U.S.A., B.W.I., and Luxembourg in Overall, funds reported information to fewer database providers in 2013 compared to The proportion of funds reporting to one database provider increased by 1.82 points to 63.69%; conversely, the proportion of funds reporting to two or more databases decreased by 1.82 points. 4

5 Number of Funds Over 11,000 unique funds reported information across databases in 2013: 7,524 HFs, 1,723 CTA/MF funds, and 2,074 FoHFs. Based on available data in early 2014, there was a decline in reporting among all three segments of the industry from 2012 to The largest decrease in reporting came from CTA/MF funds (-19.34% YOY) followed by FoHFs (-10.53% YOY) and HFs (-6.10% YOY). A future re-examination of the 2013 totals may show a smoother delta as new fund launches are eventually captured in databases. Larger percentage declines in reporting among CTA/MF and FoHFs lifted HFs from comprising 64.27% of the reporting universe in 2012 to 66.46% in In absolute terms, the net number of HFs ceasing to report (-489) was double the number of FoHFs ceasing to report (-244) and several dozen more funds than CTA/MF (-413). Of the HFs still reporting as of 2013, the largest influx based on performance start dates occurred in 2010 with a total of 840 funds; for CTA/MF funds it was 2011 (214 funds) and for FoHFs it was 2009 (190 funds). Totals have waned in recent years but these new fund arrivals immediately following the global financial crisis demonstrate resilience in the alternatives industry. Figure 1: Number of funds reporting (left) and YOY percentage change in reporting from 2012 to 2013 (right) 14,000 0% 12,000 2,318-5% 10,000 2, % 2,136 8,000 1,723-10% % 6,000-15% 8,013 7,524 4,000-20% % 2, % HF CTA/MF FoHF HF CTA/MF FoHF Figure 3: Universe composition by fund type Figure 2: First reported return date for funds still reporting as of % 18.32% % % 15.22% % HF CTA/MF FoHF HF CTA/MF FoHF HF CTA/MF FoHF 5

6 Number of Firms Over 4,500 firms reported information across databases in Firms managing only HFs outnumbered firms managing only CTA/MF funds by 4.4x and outnumbered firms managing only FoHFs by 6x. Firms managing only HFs represented nearly two-thirds (63.79%) of all firms in 2013, while those managing CTA/MF along with FoHFs represented the smallest percentage (0.79%). Only 1.71% of firms managed all three fund types. In 2013, nearly 3,000 firms managed only one fund each. The number of firms managing two funds was just onequarter of this total and the number managing three funds was roughly half of the two fund total. Each sequential increase in the number of funds managed by firms from three to four to five and up to eight funds showed the number of firms doing so declining by an average of 37% per tier. There was no significant decline when comparing the number of firms managing nine funds versus eight and there were 144 firms managing 10 or more funds. Figure 5: Firm universe composition by types of funds managed and YOY change Types of Funds Managed 2012 Count 2013 Count YOY Change YOY % Change HF Only 3,175 2, % CTA/MF Only % FoHF Only % HF & CTA/MF % HF & FoHF % CTA/MF & FoHF % All % Total 5,075 4, % Figure 4: Firm percentage universe composition by types of funds managed HF & CTA/MF 4.47% FoHF Only 10.68% HF & FoHF 4.81% CTA/MF Only 14.74% CTA/MF & FoHF 0.87% All 1.87% 2012 Figure 6: Firm count by number of funds managed ,998 2, HF Only 62.56% HF & CTA/MF 4.13% FoHF Only 10.64% CTA/MF Only 14.36% HF & FoHF 4.58% CTA/MF & FoHF 0.79% All 1.71% Firm Count 2013 Firm Count HF Only 63.79% 2012 Firm Count 2013 Firm Count 6

7 AUM by Fund The overall percentage of funds reporting asset information alongside performance rose from 78.37% to 81.19% between 2012 and HFs experienced a 2.48 point increase and CTA/MF funds a 9.46 point improvement, but FoHFs declined by 1.42 points. A total of 512 HFs and CTA/MF funds reported USD one billion or more in assets in 2013, for a combined AUM of USD trillion. These largest funds managed nearly 68% of the total USD trillion reported by all HFs and CTA/MF funds. 119 FoHFs reported USD one billion or more in assets in 2013 for a combined AUM of USD 313 billion. These largest funds managed 63% of the total USD billion reported among all FoHFs. Total reported HF and CTA/MF fund assets were 5.4x larger than reported FoHF assets in 2013, compared to 4.7x larger in Combined assets of the billion-dollar FoHFs were 17.3% the size of the billion-dollar HFs and CTA/MF fund in 2013, compared to a slightly larger, 18.6% share, in Figure 8: Percentage of funds reporting asset information in 2012 (patterned bars on left) and 2013 (solid bars on right) 90% 85% 80% 75% 70% 65% 78.89% 76.41% 75.80% 87.53% 85.26% 86.11% HF CTA/MF FoHF Figure 7: Number of funds reporting assets and total AUM by fund size tiers for HFs, CTA/MF, and FoHFs in USD billions Single-Manager Hedge Funds Total % of Fund Fund % Total % of Fund Fund % Fund Size AUM Total Count Count Fund Size AUM Total Count Count $1b+ $1, % % $1b+ $1, % % $750 - $999m $ % % $750 - $999m $ % % $ m $ % % $ m $ % % $ m $ % % $ m $ % % $ m $ % % $ m $ % % $1-99m $ % 3, % $1-99m $ % 3, % <$1m $ % % <$1m $ % % Total $1, % 6, % Total $2, % 5, % CTA/Managed Futures Total % of Fund Fund % Total % of Fund Fund % Fund Size AUM Total Count Count Fund Size AUM Total Count Count $1b+ $ % % $1b+ $ % % $750 - $999m $ % % $750 - $999m $ % % $ m $ % % $ m $ % % $ m $ % % $ m $ % % $ m $ % % $ m $ % % $1-99m $ % % $1-99m $ % % <$1m $ % % <$1m $ % % Total $ % 1, % Total $ % 1, % Funds of Hedge Funds Fund Size Total AUM % of Total Fund Count Fund % Count Fund Size Total AUM % of Total Fund Count Fund % Count $1b+ $ % % $1b+ $ % % $750 - $999m $ % % $750 - $999m $ % % $ m $ % % $ m $ % % $ m $ % % $ m $ % % $ m $ % % $ m $ % % $1-99m $ % 1, % $1-99m $ % 1, % <$1m $ % % <$1m $ % % Total $ % 2, % Total $ % 1, % 7

8 AUM by Fund (continued) Reported single-manager hedge fund assets increased by USD billion in Funds with, or exceeding, USD 750 million in AUM accounted for 100.6% of this reported rise (smaller fund declines were offsetting of the total) and nearly 84% was concentrated in the USD 1 billion or larger group. New allocations, performance-based gains, and HFs reporting asset information for the first time or improved master asset data helped elevate the total reported AUM. CTA/MF and FoHF assets decreased by USD 13.8 billion and USD 12.6 billion in 2013, relatively muted figures when compared to the single-manager HF jump. HFs with USD 750 to 999 million experienced the largest YOY percentage increases in total reported AUM (46.03%) and in funds reporting assets (43.75%). CTA/MF funds managing under USD 100 million represented 75.6% of the total 2013 number of CTA/MF reporting, but comprised 93.3% of the YOY decrease in the number ceasing to report assets alongside performance. AUM and fund count increased for FoHFs with USD one billion or more in assets in 2013, making it the only FoHF size segment to undergo YOY increases in both categories. Figure 10: Distribution of reported asset change from 2012 to 2013 for single-manager hedge funds HFs with $750 - $999m in AUM 16.89% $262.5 Billion HFs with $1b+ in AUM 83.66% Figure 9: Changes in reported AUM in USD billions and number of funds providing assets alongside performance from 2012 to 2013 (left) and average fund AUM in USD millions by size in 2013 (right) Single-Manager Hedge Funds Change Change % change % change Fund Size AUM Count AUM Count $1b+ $ % 12.63% $750 - $999m $ % 43.75% $ m $ % 0.79% $ m $ % -0.56% $ m -$ % -1.18% $1-99m -$ % -7.47% <$1m $ % 1.58% Total $ % -3.05% CTA/Managed Futures Change Change % change % change Fund Size AUM Count AUM Count $1b+ -$ % 0.00% $750 - $999m -$ % % $ m -$ % % $ m $ % 4.71% $ m $ % 0.00% $1-99m -$ % -7.49% <$1m $ % % Total -$ % -9.26% Funds of Hedge Funds Change Change % change % change Fund Size AUM Count AUM Count $1b+ $ % 8.18% $750 - $999m -$ % % $ m -$ % % $ m -$ % -6.45% $ m -$ % % $1-99m -$ % % <$1m $ % % Total -$ % % $1b+ $750 - $999m $ m $ m $ m $1-99m <$1m $1b+ $750 - $999m $ m $ m $ m $1-99m <$1m $1b+ $750 - $999m $ m $ m $ m $1-99m <$1m $159.0 $31.2 $0.5 $20.6 $0.4 $615.2 $355.2 $364.4 $155.5 $32.3 $0.5 $873.6 $850.9 $618.7 $357.6 $161.2 $877.0 $617.4 $3,346.8 $4,783.4 $2,

9 HF, CTA/MF, and FoHF AUM by Firm Reported industry assets were concentrated among firms with the largest HF & CTA/MF and FoHF operations to a greater degree than the largest funds. Firms with USD one billion or more in HF and CTA/MF assets managed 83.28% (USD trillion) of the combined segments overall 2013 reported AUM compared to 67.89% (USD trillion) managed by the largest HF and CTA/MF funds. Firms with the largest FoHF operations managed 80.41% (USD billion) of FoHFs total reported AUM versus 63.22% (USD 313 billion) managed by the largest funds. The difference in the distribution of reported assets by firm versus funds was positive only for HF & CTA/MF and FoHF firms with USD one billion or more (see figure 12), implying that many of the largest firms manage multiple, varioussized funds. Smaller firms were the predominant reason for the decline in the number of firms reporting assets alongside performance from 2012 to 2013 (see figure 13). Only the firms with the largest HF and CTA/MF operations experienced increases in reported AUM in 2013: firms with one billion or more in AUM increased by USD 285 billion and firms with USD million by USD 20.8 billion. Figure 12: Percentage point differences in distribution of assets by firm vs. fund in 2013 Figure 11: Number of firms reporting assets and HF & CTA and FoHF AUM by firm in USD billions Single-Manager Hedge Funds & CTA/Managed Futures Funds Firm HF/CTA Total % of Firm Firm % Firm HF/CTA Total % of Firm Firm % AUM AUM Total Count Count AUM AUM Total Count Count $1b+ $1, % % $1b+ $2, % % $750 - $999m $ % % $750 - $999m $ % % $ m $ % % $ m $ % % $ m $ % % $ m $ % % $ m $ % % $ m $ % % $1-99m $ % 2, % $1-99m $ % 2, % <$1m $ % % <$1m $ % % Total $2, % 4, % Total $2, % 3, % Funds of Hedge Funds Firm FoHF Total % of Firm Firm % Firm FoHF Total % of Firm Firm % AUM AUM Total Count Count AUM AUM Total Count Count $1b+ $ % % $1b+ $ % % $750 - $999m $ % % $750 - $999m $ % % $ m $ % % $ m $ % % $ m $ % % $ m $ % % $ m $ % % $ m $ % % $1-99m $ % % $1-99m $ % % <$1m $ % % <$1m $ % % Total $ % % Total $ % % Figure 13: Change in number of firms providing assets from 2012 to 2013 for HFs & CTA/MF funds (left) and FoHFs (right) $1b $750 - $999m $ m $ m $ m $1-99m <$1m HF & CTA FoHF $1b+ $750 - $500 - $250 - $100 - $999m 749m 499m 249m -193 $1-99m -38 <$1m $1b+ $750 - $500 - $250 - $100 - $999m 749m 499m 249m -85 $1-99m 4 <$1m 9

10 Funds by Firm Location In 2013, 38.4% of HFs and CTA/MF funds reported firm locations in the U.S.A., 16.4% in the U.K., and 6.9% in China (see description in figure 14 for important location details). Firms located in the U.S.A. managed 52.9% of all reported HF and CTA/MF assets and those in the U.K. 20.3%. Including Brazil, Switzerland, and Luxembourg, the firms within these five countries managed 84.2% of assets. HF and CTA/MF funds with firms located in the Netherlands had the highest average reported AUM in 2013 (USD 557 million), followed by funds with firms located in the U.K. (USD 475 million), and then Sweden (USD 456 million). In 2013, 26.0% of FoHFs reported firm locations in the U.S.A, 14.9% in the U.K., and 13.2% in Switzerland. Firms located in the U.S.A. managed 55.0% of all reported FoHF assets. Along with the U.K., Switzerland, France, and Ireland, the firms within these five countries managed 84.6% of assets. FoHFs with firms located in the U.S.A. had the highest average reported AUM in 2013 (USD 541 million), followed by funds with firms located in Ireland (USD 420 million) and then Sweden (USD 328 million). Figure 14: Number of funds and total reported AUM in USD billions by top 10 firm locations. Note that not all funds reported firm locations and many funds did not report assets (see figure 8). U.S.A. total includes U.S. Virgin Islands, Guam, and Puerto Rico; U.K. includes the Channel Islands, Isle of Man, and Gibraltar; B.W.I include existing and former territories of the British West Indies; China includes Hong Kong and Taiwan; Netherlands includes Netherlands Antilles Single-Manager Hedge Funds & CTA/Managed Futures Funds U.S.A. 4,141 U.S.A. 3,553 U.S.A. $1,288.1 U.S.A. $1,409.4 U.K. 1,595 U.K. 1,520 U.K. $537.8 U.K. $541.4 China 675 China 636 Switzerland $83.7 Switzerland $120.5 Switzerland 535 Switzerland 519 Brazil $72.3 Luxembourg $99.7 Brazil 445 Brazil 414 Luxembourg $64.7 Brazil $71.5 B.W.I. 328 Luxembourg 315 Australia $44.5 Germany $54.3 Luxembourg 300 B.W.I. 282 France $42.4 France $45.3 Canada 259 Canada 246 B.W.I. $37.0 Canada $44.7 France 247 France 234 China $33.4 Australia $42.1 Singapore 218 Singapore 219 Germany $29.6 Sweden $37.4 Funds of Hedge Funds U.S.A. 588 U.S.A. 540 U.S.A. $301.4 U.S.A. $272.5 U.K. 340 U.K. 310 U.K. $68.4 U.K. $66.9 Switzerland 331 Switzerland 274 Switzerland $30.0 Switzerland $41.0 France 187 Luxembourg 166 France $18.2 France $23.0 B.W.I. 175 France 161 Luxembourg $14.4 Ireland $15.5 Luxembourg 147 B.W.I. 121 B.W.I. $11.1 Luxembourg $13.5 Italy 66 China 53 Ireland $10.1 B.W.I. $11.8 China 51 Italy 52 Sweden $7.3 Italy $9.1 Brazil 49 Ireland 38 Italy $6.0 Sweden $7.9 South Africa 40 South Africa 38 China $5.3 China $5.9 Figure 15: Top 10 average HF & CTA/MF fund AUM by firm location in 2013 in USD millions $600 $500 $400 $300 $200 $100 $0 $557 $475 $456 $447 $373 $365 $360 $322 $299 $295 Figure 16: Percentage distribution of reported assets by top 10 firm locations and Rest of World (RoW) in 2013 Canada 1.68% France 1.70% Germany 2.04% Luxembourg 2.68% Switzerland 3.74% Brazil 4.52% U.K % Australia 1.58% Sweden 1.40% HFs & CTA/MF Funds RoW 7.40% U.S.A % Italy B.W.I. 1.85% 2.38% Luxembourg 2.72% Ireland 3.14% France 4.64% Switzerland 8.27% U.K % Sweden 1.59% China 1.20% RoW 5.65% FoHFs U.S.A % 10

11 Funds by Currency Denomination In 2013, nearly two-thirds (64.92%) of all HF and CTA/MF funds were denominated in US Dollars (USD), 16.27% in Euros (EUR), and 3.77% in Chinese Yuan (CNY) when including offshore Yuan (CNH). Firms for funds denominated in USD are found throughout the globe, as are firms of EUR denominated funds though to a lesser extent while firms for CNY denominated funds are concentrated almost entirely in China (see description in figure 14 for important location details). Slightly more than two-thirds (67.8%) of HF and CTA/MF funds with USD one billion or more in assets were denominated in USD (see figure 18). Combined with EUR and GBP denominated funds this total reaches nearly 90%. A greater percentage of FoHFs were EUR denominated compared to HF and CTA/MF funds (25.34% vs %). USD denominated FoHFs, representing 57.00% of the total, still dominated the landscape. Three-fourths (75.63%) of FoHFs with USD one billion or more in assets were denominated in USD. Combined with EUR (13.45%) and GBP (5.04%) this total reaches 94.12%. Figure 17: Percentage of funds and total reported AUM in USD billions by top 10 currency denominations. Note that many funds did not report assets (see figure 8). CNY includes CNH (offshore Yuan primarily traded in Hong Kong) Single-Manager Hedge Funds & CTA/Managed Futures Funds USD 66.89% USD 64.92% USD $1,830.2 USD $1,899.9 EUR 15.47% EUR 16.27% EUR $304.0 EUR $415.1 CNY 3.50% CNY 3.77% GBP $111.3 GBP $101.1 BRL 3.24% BRL 3.25% AUD $39.3 CHF $68.7 GBP 2.77% GBP 3.11% BRL $36.2 BRL $49.2 CAD 1.72% CAD 1.82% CHF $35.5 AUD $42.4 CHF 1.42% CHF 1.70% SEK $15.5 SEK $30.8 AUD 1.36% AUD 1.40% CAD $14.6 CAD $18.4 JPY 1.27% JPY 1.24% JPY $10.4 JPY $12.4 SEK 0.80% SEK 0.78% ZAR $4.8 ZAR $9.0 Funds of Hedge Funds USD 55.85% USD 57.00% USD $402.4 USD $357.4 EUR 26.28% EUR 25.34% EUR $60.8 EUR $82.1 CHF 5.44% CHF 5.65% GBP $14.7 GBP $14.6 GBP 3.15% GBP 2.80% CHF $12.8 CHF $13.9 BRL 1.94% AUD 1.88% SEK $7.5 AUD $10.0 AUD 1.94% BRL 1.69% AUD $4.2 SEK $7.6 SEK 1.47% SEK 1.64% BRL $2.3 BRL $4.4 ZAR 1.21% ZAR 1.40% JPY $1.9 JPY $3.4 JPY 0.82% CNY 0.77% ZAR $0.6 ZAR $0.7 CNY 0.56% JPY 0.63% NOK $0.2 CAD $0.7 Figure 18: Top 5 currency denominations for HFs & CTA/MF funds in 2013 by size tiers 80% 70% 60% 67.8% 60.9% 67.3% 65.6% 62.1% 65.7% 50% 40% 30% 20% 10% 0% 16.8% 5.1% 2.7% 2.3% $1b+ 21.2% 5.6% 2.8% 2.8% $750 - $999m 18.7% 3.3% 2.7% 2.3% $500 - $749m 19.1% 3.6% 2.4% 2.3% $250 - $499m 20.7% 4.2% 3.4% 2.0% $100 - $249m 17.3% 4.4% 2.2% 2.1% $1 - $99m USD EUR GBP CHF BRL AUD CAD 11

12 Funds by Domicile In 2013, the majority of HF and CTA/MF funds were domiciled within one of five locations: the U.S.A., existing and former territories of the British West Indies (B.W.I.), Luxembourg, Ireland, and China. Based on reported 2013 totals, most of the assets were concentrated within funds domiciled in the U.S.A. (USD billion), B.W.I. (USD billion), and Luxembourg (USD billion). However, the domicile locations for a significant sum, USD billion, could not be determined because the domicile information was not reported. HF and CTA/MF funds domiciled in northern European nations had the highest average AUM in Germany led with USD 565 million, followed by the Netherlands (USD 564 million), Sweden (USD 526 million), and the U.K. (USD 456 million). For FoHFs in 2013, the domiciles for nearly one-quarter (23.08%) of assets could not be identified because the information was not reported. Of the information that was, most of the AUM was located in the same places preferred by HF and CTA/MF funds: U.S.A. (USD billion), B.W.I. (USD 95.2 billion), and Luxembourg (USD 43.8 billion). Figure 19: Number of funds and total reported AUM in USD billions by top 10 domiciles. Note that not all funds reported firm locations and many funds did not report assets (see figure 8). U.S.A. total includes U.S. Virgin Islands, Guam, and Puerto Rico; U.K. includes the Channel Islands, Isle of Man, and Gibraltar; B.W.I include existing and former territories of the British West Indies; China includes Hong Kong and Taiwan; Netherlands includes Netherlands Antilles Single-Manager Hedge Funds & CTA/Managed Futures Funds U.S.A. 2,972 U.S.A. 2,541 Not Provided $785.5 U.S.A. $810.3 B.W.I. 2,356 B.W.I. 2,095 U.S.A. $644.2 Not Provided $591.1 Luxembourg 1,189 Luxembourg 1,229 B.W.I. $309.5 B.W.I. $419.2 Not Provided 698 Not Provided 585 Luxembourg $275.5 Luxembourg $352.0 Ireland 514 Ireland 543 U.K. $122.3 Ireland $141.0 China 359 China 348 Ireland $85.0 U.K. $83.5 Brazil 336 Brazil 309 Brazil $81.2 Brazil $50.3 U.K. 261 U.K. 222 France $27.6 France $32.7 Canada 199 Canada 197 Switzerland $25.5 Sweden $25.8 France 148 France 144 Australia $18.4 Switzerland $25.1 Funds of Hedge Funds B.W.I. 609 B.W.I. 520 U.S.A. $185.0 U.S.A. $123.9 U.S.A. 380 Luxembourg 374 Not Provided $108.9 Not Provided $114.3 Luxembourg 378 U.S.A. 356 B.W.I. $87.0 B.W.I. $95.2 France 148 France 126 Luxembourg $32.9 Luxembourg $43.8 U.K. 143 U.K. 122 U.K. $21.6 U.K. $28.7 Switzerland 86 Switzerland 80 Ireland $16.0 Ireland $19.9 Not Provided 80 Ireland 72 Switzerland $10.5 France $19.6 Ireland 72 Not Provided 65 France $9.0 Switzerland $10.8 Italy 57 Italy 47 Sweden $6.8 Italy $8.7 Brazil 45 Brazil 35 Italy $5.7 Sweden $7.9 Figure 20: Top 10 average HF & CTA/MF fund AUM by domicile in 2013 in USD millions $700 $600 $500 $400 $300 $200 $100 $0 $565 $564 $526 $456 $384 $375 $369 $364 $311 $262 Figure 21: Percentage distribution of reported assets by top 10 domiciles and Rest of World (RoW) in % Brazil 1.89% U.K. 3.14% Ireland 5.29% Luxembourg 13.21% France Sweden 0.97% B.W.I % Switzerland 0.94% HFs & CTA/MF Funds RoW 4.98% U.S.A % Not Provided 22.19% Switzerland 2.18% France 3.97% Ireland 4.02% U.K. 5.80% Luxembourg 8.85% Italy 1.76% B.W.I % Sweden 1.59% RoW 4.48% FoHFs U.S.A % Not Provided 23.08% 12

13 Database Reporting Trends For this section we chose to analyze all available investment vehicles, including shares, series, feeders, etc., instead of just the unique rolled-up fund record used throughout the report, in order to more accurately get a sense of the ease or difficulty with which investors are able to find suitable funds that meet their specific criteria (leverage levels, fee structures, etc.) within databases. While managers may report information on their master funds to multiple databases, they may choose to provide information on none or only few shares, series, feeders, etc. to one database. The available data in early 2014 shows funds reported information to fewer database providers in 2013 compared to The proportion of funds reporting to one database provider increased by 1.82 points to 63.69%; conversely, the proportion of funds reporting to two or more databases decreased by 1.82 points. The percentage of funds reporting to five database providers decreased by 48 bps; this represents the largest year-over-year decline among the database categories. Newer, smaller fund entrants from areas of the globe with relatively limited database competition were primarily responsible for the YOY increase in the proportion of funds reporting information to just one database provider. Revisiting the data in the future may show differences in reporting trends. As funds which already report information to one database provider develop good track records, they may choose to submit information to additional database providers information that should include backfilled performance returns and this could result in an increase in the proportion of funds being shown to have reported to two or more providers in However, this may be counteracted by funds which are currently in an incubation period a period in which they are developing their track records if they finally do decide to begin reporting and do so only with a single database provider. Figure 22: Proportion of funds (including shares, series, feeders, etc.) reporting to one or more database providers in 2012 and % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 0.13% 0.11% 5.22% 4.73% 6.26% 5.84% 8.64% 16.18% 8.43% 15.88% 61.87% 63.69% One Two Three Four Five Six Seven Managers seeking to gain exposure with investors should consider reporting to multiple database providers because investors have several database options they can choose from, and exclusion from one may result in a lost allocation opportunity. Investors should consider making use of multiple database providers during their fund research process since 63.69% of funds reported to just one database in By utilizing only a single database, investors may be overlooking funds in other databases that could be ideal candidates for their allocations. 13

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