A fascinating online analytics study published by Chief Investment Officer on July 7th highlights that the growth in assets among large hedge funds closely correlates with their popularity in Google search. That is, a hedge fund that sees a notable growth in Google trend data is very likely to see roughly comparable growth in AUM over the next few quarters.
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The study highlights that Ray Dalio’s Bridgewater Associates has had the most Google searches among hedge funds for almost 11 years now, and over that period has become the acknowledged industry leader with two and a half times the AUM of its closest competitor.
Not related to the managers of hedge funds
While their is a strong correlation between Google searches for a hedge fund and growth in its AUM, there is only a very tenuous connection between searches for the name of the hedge fund manager and AUM growth. As Leanna Orr of CIO points out, “Dalio’s famous name isn’t responsible for making Bridgewater the Justin Bieber of the hedge fund world. In fact, the notoriety of funds’ leading men (and it’s always men) proves a weak indicator of firms’ own popularity.”
She goes on to note that disgraced Steve Cohen (formerly of SAC), John Paulson and Bill Ackman have all seen more Google searches than Dalio in the last decade, but Paulson & Co. and Pershing Square are not among the list of top five most popular hedge funds.
George Soros is a perfect example of why the online popularity – AUM growth relationship doesn’t hold for managers like it does hedge fund names. Soros has been searched for on Google almost 10 times as often as Cohen or Paulson over the last year, and an amazing 26 times more than Dalio. However, despite the popularity of searches for Soros, for every query about Soros Fund Management, Google sees almost six searches for Bridgewater Associates.
Google search data predicts both winners and losers
Google search trends can predict hedge fund winners and losers. The fastest climber on Preqin’s recent list of mega-funds is AQR. The fund has moved up from under $25 billion AUM and 10th place on the list at the end of 2012 to an amazing $65 billion by year-end 2014, second only to Bridgewater in global AUM.
Orr highlights that AQR had more search traffic in 2012 than the #3 fund by AUM (Brevan Howard), #4 (Och Ziff), #5 (BlueCrest Capital), #7 (Baupost) or #9 (Winton Capital). If you don’t include bank-sponsored funds (such as those of Standard Life Investments and BlackRock), then only Bridgewater (#1) and Man Group (#2) saw more Google searches than AQR that year.
BlueCrest Capital, managed by billionaire Michael Platt, is good example of a fund whose very low Google traffic back in 2012 was a flashing warning signal of trouble ahead. BlueCrest was fifth globally among hedge funds in 2012, with a solid $35 billion under management.
However, today, industry sources estimate that BlueCrest’s AUM is probably not much more than $14 billion. That represents a more than 60% decrease in two years. Sector analysts note the fund saw a $9 billion decrease in AUM in January as the firm’s computer-driven trading team was spun off, but Orr points out even that notable event did not produce much of surge in web searches for BlueCrest.