Four-Fifths Of Europe-Based Hedge Fund Managers Believe Britain Will Remain In The EU by Preqin
Firms in the UK and rest of Europe agree over the likely result of the referendum, but show different outlooks on the impact Brexit would have on the hedge fund industry
A survey of 270 fund managers conducted by Preqin in early June finds that Europe-based hedge fund managers agree on their predictions for the outcome of the June 23rd referendum. Seventy-nine percent of managers in both the UK and the rest of Europe believe Britons will vote to remain in the EU, while 14% of managers in both regions think they will opt to leave. However, European managers differ on their perception of the impact that a British exit from the EU would have; 59% of UK-based firms believe that an exit would have some level of negative impact on the global hedge fund industry, while in the rest of Europe 35% of managers believe Britain leaving would have negative consequences. In contrast, almost twice as many European managers (31%) as UK-based managers (17%) think a British exit from the EU would have a positive effect on the hedge fund industry.
Seth Klarman: Investors Can No Longer Rely On Mean Reversion
"For most of the last century," Seth Klarman noted in his second-quarter letter to Baupost's investors, "a reasonable approach to assessing a company's future prospects was to expect mean reversion." He went on to explain that fluctuations in business performance were largely cyclical, and investors could profit from this buying low and selling high. Also Read More
With the EU referendum debate impacting European markets it is unsurprising that the performance of hedge funds based in the region has been affected; 48% of UK-based managers, and 41% of other Europe-based managers stated that their performance had been affected by the debate in the first half of 2016. Elsewhere, the debate has had less impact on hedge fund performance; 85% of fund managers in North America stated that they had seen no effect on fund performance as a result of the referendum, and the majority (58%) foresee no long-term impact to the industry if Britain were to leave the bloc.
Key Facts on the UK and EU Hedge Fund Industries:
- Fund Performance: Despite the Preqin All-Strategies Hedge Fund benchmark currently returning 1.55% for 2016 so far, both UK- and EU-based funds have recorded YTD losses of -0.22% and -0.46% respectively. In 2015, UK-based funds outperformed their EU counterparts, making gains of 3.01% compared to 1.24% for funds based in other EU countries.
- Industry Size: 600 of the 954 EU-based fund managers are based in the UK. The AUM of UK-based fund managers total $472bn, whereas the assets held in other EU countries stand at a combined $138bn.
- Investors and Funds: The majority of institutional investors active in hedge funds within the EU are UK based. 403 of the 745 investors based in the EU are headquartered in the UK. Similarly, 1,603 of the 2,456 hedge fund vehicles within the EU are managed by UK firms.
- Fund Launches: Between 2010 and 2015, the majority of fund inceptions in the EU have been UK based; in 2015 nearly three-quarters (74%) of all EU hedge fund launches occurred in the UK, with 121 funds launched in the country, compared to 43 funds incepted across the rest of the EU.
“As the date of the EU referendum regarding Britain’s membership of the EU draws near, Preqin has polled hedge fund managers globally to find out more about their predictions for the outcome of the vote. The consensus globally is that Britons will choose to remain part of the EU; and within the UK nearly 80% of fund managers believe that the “Remain” camp will win out.
The impact of the debate on hedge fund performance has been most significant for those funds within Europe; around a third of fund managers in the UK and the rest of Europe believe it has negatively impacted their performance in the first half of 2016. The outlook on the potential impact of a vote to leave is mixed between regions; perhaps unsurprisingly, UK-based managers see the greatest potential for a negative impact on the industry should the British people decide to leave the Union.”
Amy Bensted – Head of Hedge Fund Products, Preqin
UK EU Referendum: Hedge Fund Manager Outlook
With Britons poised to hit the polls on 23 June to decide their fate within the European Union (EU), Preqin has turned its attention to the Brexit debate and its implications for the hedge fund industry. As part of our wider survey of hedge fund managers, the results of which are due out in July (to see the full results, please register your interest here), we asked 270 hedge fund managers globally for their opinions on whether or not Britain will decide to exit the EU, the impact that the in/out debate has had on their funds so far in 2016, and their outlook on what disruption could be caused in the hedge fund industry by a Brexit in the future. Also, using data from Preqin Hedge Fund Online we take a closer look at the UK and EU hedge fund industries to assess which firms will be impacted by the decision of the British people.