Amy Bensted of Preqin, in a report dated May 7, 2014, said firms headquartered in the U.K. now account for $423 billion in hedge fund assets–more than 10 times the amount of assets managed in any single other European country.
Prolific launches by UK hedge funds
Preqin’s report indicates that 2013 was the most prolific year for hedge fund manager launches in the U.K. to date, with 38 new groups setting up business there over the course of the year. On the contrary, the number of new firms coming into the market in the rest of Europe has fallen from a peak of 35 in 2006 to 17 in 2013.
In a rare interview with Harvard Business School that was published online earlier this month, (it has since been taken down) value investor Seth Klarman spoke at length about his investment process, philosophy and the changes value investors have had to overcome during the past decade. Klarman’s hedge fund, the Boston-based Baupost has one of Read More
The following graph captures hedge fund firm launches since 2005:
The report points out that the slowdown in new hedge fund managers setting up business in Europe can be partially ascribed to the AIFMD regulation in Europe, which is deterring some prospective new firms from setting up a hedge fund business in the region. However, the U.K. remains the sole exception, as it has the most hedge fund managers and the highest assets under management in Europe. Moreover, in contrast with the continent overall, new fund manager growth in the U.K. remains strong, with London acting as the nucleus for the U.K. hedge fund industry.
The following graph highlights the U.K. and Rest of Europe-based hedge fund launches pre-2000:
U.K. hedge fund saw net increase in AUM
Preqin’s report indicates that U.K.-based hedge fund managers have witnessed a net increase in assets under management of around $57 billion between January 2013 and April 2014. On the contrary, hedge fund managers based in France, Spain and Germany have witnessed a net decrease in assets over the same time period.
The following graph depicts the change in hedge fund AUM by country between January 2013 and April 2014:
As can be deduced from the above graph, Switzerland-based fund managers had the second highest growth in assets within Europe between January 2013 and April 2014, with these managers having a net increase in AUM of $10 billion.
Preqin’s report points out that the number of funds being set up by U.K.-based fund managers is also encouraging; there were 91 new hedge fund launches in the U.K. in 2013, compared to 90 new hedge fund launches by managers based elsewhere in Europe. The report notes that over the course of the rest of 2014, it will be interesting to see if the U.K. continues to see increasing volumes of new manager launches and if regulation and other hurdles continue to hinder start-ups in the rest of Europe.