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$3 Trillion Hedge Fund Industry a Mirage

Report: Systematic Strategies

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Stockholm (HedgeNordic) – Various financial media outlets and data providers, including HedgeNordic, have recently talked about the hedge fund industry capital hitting a new record due to strong investor inflows in the second quarter of the year. While the industry’s assets under management are often estimated to be in excess of $3 trillion, executives at London-based hedge fund Winton Group suspect the industry is much smaller than people think.

Winton executives have launched a review into the collective assets managed by the global hedge fund industry, with the review expected to challenge widely-accepted industry figures provided by a handful of data providers. For instance, hedge fund data provider HFR estimated that total industry capital increased to a record $3.1 trillion through mid-year. Data collected by peer data provider Preqin shows hedge fund industry capital stands at $3.4 trillion as of the end of June.

“Our preliminary findings show that a $3tn industry – one characterized by a 2 and 20 fee model, low transparency, which is lightly regulated, illiquid, employs high leverage and makes extensive use of shorting – does not exist,” Jonathan Levy, the head of product research at Winton who leads the review, told news provider Financial News. The review is conducted internally by Winton’s research team and is anticipated to conclude this month. Computer-driven Winton was founded by David Harding in 1997 and is one the largest hedge funds in the world, with $29.3 billion in assets under management as of the end of June.

While the methods used in conducting the review are unknown, Winton’s views on what a hedge fund is could help explain their results. At the end of the day, there are no universally-accepted definitions of a hedge fund. On many occasions, terms such as unregulated, leverage, short positions, high risk, exotic or offshore are used to describe hedge funds. Regardless of the methods and assumptions used, many players in the finance world are keen on seeing what comes out of Winton’s review.

 

Picture (c) Fer-Gregory – shutterstock.com

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Eugeniu Guzun
Eugeniu Guzun
Eugeniu Guzun serves as a data analyst responsible for maintaining and gatekeeping the Nordic Hedge Index, and as a journalist covering the Nordic hedge fund industry for HedgeNordic. Eugeniu completed his Master’s degree at the Stockholm School of Economics in 2018. Write to Eugeniu Guzun at eugene@hedgenordic.com

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