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Where are the Emerging Managers

Updated: Jan 13, 2020

As an online recorder tracks 867 first-time funds with a track record of three years or less, while there are more than twice as many (1,759) first-time funds with $300mn or less in AUM. Without any clue whether they may overlapped, we assume that the ones with shorter history are with AUM greater then $300mn, while the "$300mn or less" ones are small but older.

As seen in the chart, Europe accounts for a larger share (22%) of first-time hedge funds that have $300mn or less in AUM than any other category. In contrast, just 15% of emerging managers with a track record of three years or less are based in Europe. More than two-thirds (70%) of these managers are based in North America. Of the 14,621 active hedge funds tracked on records, the largest proportion (43%) employ an equity strategy. This is also true across the different categories of first-time funds; however, for these funds the proportions are slightly higher. Across all fund groups, the largest proportion (16%) of CTAs are managed by emerging managers with funds of $300mn or less in AUM;

Although first-time funds with a shorter track record outperform funds with smaller AUM, investors exhibit a greater preference for smaller funds than funds with a shorter track record.

Nearly three-quarters (72%) of institutions that are active in hedge funds consider investing in funds with assets of $300mn or less. However, there is still significant interest in funds with shorter track records. Using data taken from the recorder’s portfolio search tool, which analyzes investor preferences based on the named fund investments previously made, there are 524 investors that are invested in a fund with a track record of three years or less.

Almost all (92%) institutions that invest in hedge funds with a track record of three years or less are based in North America (Fig. 8). In contrast, investors in funds with $300mn or less in AUM are more geographically diverse: a significant proportion (38%) are based in Europe.

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