Biggest Hedge Funds By Assets Under Management April 2017

This is the April edition of my series of monthly posts on the world’s biggest hedge funds by assets under management. It is based on data available as of April 4, 2017. To keep things interesting I used a different approach to selecting the firms to include, and I included a little more granularity on the types of employees at each.

A Different Approach

This month I have taken a different approach to selecting the firms to include. A reporting advisor must file information about the profile of its customer base in Item 5 Section D. There are two subsections, in the first the firm indicates what proportion of accounts by number fall into various different customer categories e.g. individuals, high net worth individuals, banks, etc. In the second, the firm provides that same information but the proportion is by regulatory assets under management. Here is what AQR’s Item 5.D looks like (View the full filing):

For some reason the SEC uses different ranges for each profile! Maybe it’s an effort to protect the firms from having to disclose too much in terms of where the dollars are.

Fund vs. Manager

When we talk about a “hedge fund” it helps to be clear whether we mean the fund itself (or funds) or the hedge fund management company. The fund itself is the investment vehicle, the entity that holds the capital whose investment is directed by the hedge fund management company. The hedge fund earns the returns, the hedge fund management company earns the fees. The hedge fund is the advisory client of the hedge fund management company. The management company is the RIA and files the Form ADV. In most cases, a single hedge fund management company manages multiple hedge funds.

Picking Out the Hedge Fund Managers

One way of attacking the data is to ask the question: what customer profile do I expect a “pure” hedge fund management company to have. The simple answer is to look at the proportion of accounts or regulatory assets under management that are in the category “Pooled investment vehicles (other than investment companies)”. If the majority of accounts (76-99% or 100% radio buttons selected) or regulatory AUM (>75% radio button selected) is in that category, then the firm has a good chance of being a hedge fund management company. But there are a couple of caveats:

• Applying these filters will include some investment strategies not typically thought of as hedge fund strategies, though they will most likely be thought of as “alternatives” such as Real Estate, Private Equity, etc. Further filtering can be applied to eliminate these firms.
• Applying these filters will exclude some firms that are thought of as hedge fund firms – for example, AQR will be excluded. Typically this results when the firm runs separately managed accounts for institutional clients, or manages 40 Act funds.

Your Firm’s Form ADV

Check out your own firm’s Form ADV at the SEC’s Investment Advisor Public Depository website – you may be surprised at how much information is in there. Imagine how useful it would be to have all that information on your peers in a spreadsheet and to monitor how it evolves over time.

Custom Analysis

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And the world’s biggest hedge funds by assets under management – April 2017 are …

This table includes the 50 largest registered investment advisors reporting 76-99% or 100% of accounts by number or >75% regulatory AUM in the category “Pooled investment vehicles (other than investment companies)”. The groupName column shows firms with common control or ownership. Bear in mind, some of these firms may be co-advisors managing the same money. See Methodology below for more details.

Note: click column headings to sort. Use drop-down to set number of rows per page.

The April file is no longer available. The button will deliver the current version.

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Methodology

RSelenium

In order to complete the research for this post, I made use of a script in R using the RSelenium package. I have previously published a post about how to set up RSelenium using the latest version of Selenium, and an earlier post reviewing some of the most useful functions in the package. This package makes it possible to automate the collection of data from websites; the process is called web-scraping.

Regulatory Assets Under Management

I use Item 5.F.2.(a) discretionary regulatory assets under management to define the biggest hedge fund managers. This is NOT the number typically used in the various “biggest” lists, which is client asssets, or fee base. The SEC defines regulatory assets under management as the total of all securities (including cash and equivalents) in all the portfolios managed by the firm (without double-counting in the case of complex structures). The number is NOT net of borrowings, or short positions. Futures contracts are NOT securities, so they are not included in any portfolio, though the margin cash is. As a consequence, managers employing materially different approaches are not directly comparable in terms of regulatory AUM.

Hedge Fund Filter

I use Item 5.D.1.(f) to find the proportion of the manager’s client accounts that are pooled investment vehicles (other than investment companies). I assume a value of either 76 – 99% or 100% indicates the firm is a hedge fund manager. I use Item 5.D.2.(f) to find the proportion of the manager’s regulatory AUM that are in pooled investment vehicles (other than investment companies). I assume a value of >75% indicates the firm is a hedge fund manager. To be included, a manager had to meet either of these criteria.

Affiliated Groups

Schedule D. Item 7.A of Form ADV includes a list of firms affiliated with the filing firm. An affiliate is a firm that shares some kind of ownership connection with the filing firm. Since the filing firm includes the CRD Number of each affiliate, if it is registered, I was able to cross-check the list of firms to see if it was already included. I assigned each of these firms the same group name.

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