FEATURE Emerging Hedge Funds: Can They Outperform?
2
FEATUREHedge Funds and Brexit: One Year On
6
INDUSTRY NEWS 9
THE FACTS■ Performance
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Performance■ California-Based
Hedge Fund Investors■ UCITS Hedge Funds■ Fund Searches and
Mandates
10
11
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CONFERENCES 18
EMERGING HEDGE FUNDS: CAN THEY OUTPERFORM?
14.10% 14.10%First-time funds with a track record of three years or less have made gains of 14.10% over the past 12 months. How does this compare to the wider hedge fund industry and what appetite do investors have for emerging hedge funds?
Find out more on page 2
HEDGE FUND
SPOTLIGHTVOLUME 9, ISSUE 5 ■ June 2017
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HEDGE FUNDS AND BREXIT: ONE YEAR ON
One year ago, two days before the UK EU referendum, Preqin released a report looking at the views of hedge fund managers on this important vote. Here, we look at how Brexit is impacting hedge fund managers one year on from the referendum.
Find out more on page 6
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EMERGING HEDGE FUNDS: CAN THEY OUTPERFORM?
© Preqin Ltd. 2017 / www.preqin.com2 Hedge Fund Spotlight | June 2017
EMERGING HEDGE FUNDS: CAN THEY OUTPERFORM? We take a look at the hedge fund industry’s emerging managers, defined as small or young funds, to evaluate their performance, the strategies employed, terms and conditions and investors in these funds.
Emerging managers are an important part of the hedge fund landscape,
with investors drawn by their potential to offer higher returns among other reasons. However, the definition of an emerging manager will vary from investor to investor; what a large pension fund will consider as an emerging fund may differ from a small family office, for instance.
In this article, we examine two ways to group or define emerging hedge funds to assess whether these funds do outperform their established counterparts, what appetite there is from investors and what options there are for investors looking to allocate capital to emerging managers. The criteria we evaluate emerging managers against are:
■ First-time funds (FTFs) with assets under management (AUM) of $300mn or less;
■ First-time funds with a track record of three years or less.
YOUNG FUNDS OUTPERFORM SMALL FUNDSEmerging hedge funds may be more prone to failure, either due to their strategies being untested through market cycles
or as a result of their small size making them more vulnerable to capital losses. Therefore, investors expect emerging manager hedge funds to generate strong returns in order to compensate for the higher risk that can be associated with investing in them. Funds with a track record of three years or less, and funds with $300mn or less in AUM, outperform the wider hedge fund industry over a 12-month, three-year and five-year timeframe (Fig. 1). Funds that have a track
record of three years or less produce significantly better returns than both funds with $300mn or less in AUM, and the wider hedge fund industry, delivering a five-year annualized return of 12.22% compared to 8.98% for small first-time funds. Some funds have returned significantly more than this; for example, Volpoint Fund, LP was launched in January 2016, and in the 12 months to May 2017 has returned 107.31%.
11.91%
5.97%
8.98%
4.78% 4.47%
0.83
1.56
14.10%
8.52%
12.22%
4.03% 4.07%
1.622.51
10.22%
5.31%
7.71%
3.98% 3.70%
0.83
1.54
0%
2%
4%
6%
8%
10%
12%
14%
16%
12 Months 3-YearAnnualized
Return
5-YearAnnualized
Return
3-YearVolatility
5-YearVolatility
3-YearSharpeRatio
5-YearSharpeRatio
FTFs with ≤$300mn in AUM FTFs with Track Record of ≤3 Years All Hedge Funds
Source: Preqin Hedge Fund Online
Net
Ret
urn
Fig. 1: Performance of First-Time Funds vs. All Hedge Funds (As at May 2017)
-5%
0%
5%
10%
15%
20%
25%
Jan-
12
May
-12
Sep-
12
Jan-
13
May
-13
Sep-
13
Jan-
14
May
-14
Sep-
14
Jan-
15
May
-15
Sep-
15
Jan-
16
May
-16
Sep-
16
Jan-
17
May
-17
FTFs with ≤$300mn in AUM
FTFs with Track Record of ≤3 Years
All Hedge Funds
Source: Preqin Hedge Fund Online
12-M
onth
Net
Ret
urn
Fig. 2: Rolling 12-Month Returns: First-Time Funds vs. All Hedge Funds (As at May 2017)
Thre
e Ye
ar V
olat
ility
0%1%2%3%4%5%6%7%8%9%
Jan-
12
May
-12
Sep-
12
Jan-
13
May
-13
Sep-
13
Jan-
14
May
-14
Sep-
14
Jan-
15
May
-15
Sep-
15
Jan-
16
May
-16
Sep-
16
Jan-
17
May
-17
FTFs with ≤$300mn in AUMFTFs with Track Record of ≤3 YearsAll Hedge Funds
Source: Preqin Hedge Fund Online
Fig. 3: Three-Year Rolling Volatility: First-Time Funds vs. All Hedge Funds (As at May 2017)
EMERGING HEDGE FUNDS: CAN THEY OUTPERFORM?
© Preqin Ltd. 2017 / www.preqin.com3 Hedge Fund Spotlight | June 2017
Funds with a track record of three years or less show similar volatility to the wider hedge fund industry over a three-year basis. There has also been a convergence in the rolling 12-month volatility of these groups in 2017 (Fig. 3). In contrast, funds with $300mn or less in AUM, which produce smaller returns over all timeframes compared to other groups of emerging managers, exhibit the highest volatility over a 12-month, three-year and five-year period. This indicates that investors, on average, may be rewarded with higher returns with lower volatility when investing in first-time funds with a shorter track record, compared with those that have smaller AUM.
MEET THE EMERGING MANAGERSPreqin 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.
As seen in Fig. 4, 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, including Aecor Capital Management, which is headquartered in New York and was established in 2016. It launched its first fund, Aecor Fund, at the beginning of this year and employs an event driven strategy.
Of the 14,621 active hedge funds tracked on Preqin’s Hedge Fund Online, the largest proportion (43%) employ an equity strategy (Fig. 5). 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; for example, Germany-headquartered Catana Capital launched its debut fund, Catana Big Data, in June 2016.
As expected, the average minimum investment required for both types of first-time funds is lower than that of their more established counterparts (Fig. 6). Funds with a track record of three years or less – which have significantly outperformed the wider hedge fund industry on a 12-month, three-year and five-year basis – charge similar management and performance fees to all single-manager hedge funds. In contrast, emerging managers with $300mn or less in AUM, which outperform the wider hedge fund sector but to a lesser degree
Prop
ortio
n of
Fun
ds
58%70% 67%
22%
15% 18%
15%12% 11%
6% 2% 4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
FTFs with ≤$300mn in
AUM
FTFs with Track Record of ≤3
Years
All Hedge Funds
Rest of World
Asia-Pacific
Europe
North America
Source: Preqin Hedge Fund Online
Fig. 4: Hedge Funds by Manager Location: Active First-Time Funds vs. All Active Hedge Funds (As at May 2017)
46% 50% 43%
8%10%
8%
7%8%
11%7%
8%11%6%
7% 8%16% 7% 9%
9% 10% 10%
1% 1% 1%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
FTFs with ≤$300mn in
AUM
FTFs with Track Record of ≤3 Years
All HedgeFunds
Niche Strategies
Multi-Strategy
Managed Futures/CTA
Relative Value Strategies
Credit Strategies
Event Driven Strategies
Macro Strategies
Equity Strategies
Source: Preqin Hedge Fund Online
Prop
ortio
n of
Fun
ds
Fig. 5: Hedge Funds by Top-Level Strategy: Active First-Time Funds vs. All Active Hedge Funds (As at May 2017)
This indicates that investors,
on average, may be rewarded with higher returns with lower volatility when investing in first-time funds with a shorter track record, compared with those that have smaller AUM.
Fig. 6: Hedge Fund Terms and Conditions: Active First-Time Funds vs. Active Single-Manager Funds
Fund Type Mean Minimum Investment ($mn)
Mean Management Fee (%)
Mean Performance Fee (%)
Active FTFs with ≤$300mn in AUM 0.80 1.52 19.23
Active FTFs with Track Record of ≤3 Years 1.28 1.58 19.49
Active Single-Manager Hedge Funds 1.71 1.56 19.50
Source: Preqin Hedge Fund Online
EMERGING HEDGE FUNDS: CAN THEY OUTPERFORM?
© Preqin Ltd. 2017 / www.preqin.com4 Hedge Fund Spotlight | June 2017
than their counterparts with shorter track records, charge both lower management and lower performance fees.
SIGNIFICANT NUMBERS OF INVESTORS LOOK TO EMERGING MANAGERSAlthough 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 (Fig. 7). An example of this is Singapore Management University Endowment, which allocates SGD 250mn ($181mn) to the hedge fund industry. However, there is still significant interest in funds with shorter track records. Using data taken from Preqin’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. For example, Alvin & Fanny B. Thalheimer Foundation and France-Merrick Foundation, both based in Baltimore, allocate 30% of their AUM to hedge funds and have invested previously in funds 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; for example, London-based Clerville Investment Management invests in first-time funds with a requirement of only €100mn in AUM.
OUTLOOKThere were significant outflows from the hedge fund industry in 2016; however, with better overall performance in the
last few quarters, the beginning of 2017 saw investor inflows for the first time in five successive quarters. This has set the tone for emerging managers in the hedge fund industry; with the performance of first-time funds stronger than that of the wider hedge fund industry, now could be a prime opportunity for new hedge fund managers. Notably, younger funds (those with a track record of three years or less) have generated strong returns, achieving higher net returns than small funds.
This stronger performance may encourage institutional investors to look past the risks of these first-time funds and find opportunities with emerging managers. Indeed, the volatility of the funds with a track record of three years or less has lessened and converged with that of the wider hedge fund industry, indicating that investors can access better returns with comparable investment risk.
72%
32%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Investors in FTFswith ≤$300mn in AUM
Investors in FTFs with Track Record of ≤3 Years
Source: Preqin Hedge Fund Online
Prop
ortio
n of
Tota
l No.
of I
nves
tors
Fig. 7: Investor Appetite for Emerging Manager Funds
51%
92%
38%
5%8%2%
4% 1%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Investors in FTFs with ≤$300mn in AUM
Investors in FTFs with Track Record of ≤3 Years
Rest of World
Asia-Pacific
Europe
North America
Source: Preqin Hedge Fund Online
Prop
ortio
n of
Inve
stor
s
Fig. 8: Investors in Emerging Hedge Fund Managers by Investor Location
Preqin’s Hedge Fund Online currently tracks 14,621 active hedge funds, including 1,759 active first-time funds with $300mn or less in AUM and 867 active first-time funds with a track record of three years or less.
Performance metrics were calculated based on an Emerging Manager benchmark which was constructed on a month by month basis where the constituents were considered separately each month. Only funds which meet the Emerging Manager criteria in each given month were included, therefore the same constituent funds will not be present across the entire timeframe considered as they meet and then subsequently grow out of the given criteria.
For more information, please visit: www.preqin.com/hedge
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PREQIN GLOBAL DATA COVERAGE
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*Private equity includes buyout, growth, venture capital, turnaround, private equity fund of funds, private equity secondaries, direct secondaries, balanced, hybrid, hybrid fund of funds, PIPE, co-investment and co-investment multi-manager funds.**Buyout deals: Preqin tracks private equity-backed buyout deals globally, including LBOs, growth capital, public-to-private deals, and recapitalizations. Our coverage does not include private debt and mezzanine deals.***Venture capital deals: Preqin tracks cash-for-equity investments by professional venture capital fi rms in companies globally across all venture capital stages, from seed to expansion phase. The deals fi gures provided by Preqin are based on announced venture capital rounds when the capital is committed to a company.
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PRIVATE EQUITY* HEDGE FUNDS REAL ESTATE INFRASTRUCTURE PRIVATE DEBT NATURAL
RESOURCES
INVESTORCOVERAGE
6,581Active
Private Equity Investors
5,201Active
Hedge Fund Investors
5,753Active
Real Estate Investors
3,070Active
InfrastructureInvestors
2,699Active
Private Debt Investors
2,734Active
Natural Resources Investors
FUNDCOVERAGE
17,439Private Equity
Funds
24,138Hedge Funds
6,434PE Real Estate
Funds
1,148Infrastructure
Funds
2,304Private Debt
Funds
1,653Natural Resources
Funds
FIRMCOVERAGE
11,523Private Equity
Firms
8,939Hedge Fund
Firms
3,888PE Real Estate
Firms
513Infrastructure
Firms
1,475Private Debt
Firms
946Natural Resources
Firms
PERFORMANCECOVERAGE
5,841Private Equity
Funds
16,321Hedge Funds
1,676PE Real
Estate Funds
230Infrastructure
Funds
808Private Debt
Funds
498Natural Resources
Funds
FUNDRAISINGCOVERAGE
1,954Private Equity
Funds
16,773Hedge Funds
1,086PE Real
Estate Funds
269Infrastructure
Funds
306Private Debt
Funds
376Natural Resources
Funds
Alternatives Investment Consultants Coverage:
562Consultants Tracked
Funds Terms Coverage: Analysis Based on Data for Around
16,286Funds
Best Contacts: Carefully Selected from our Database of over
400,821Contacts
DEALS & EXITSCOVERAGE
BUYOUT VENTURE CAPITAL REAL ESTATE INFRASTRUCTURE
80,464 Buyout Deals** and Exits
135,415 Venture Capital Deals*** and Exits
37,056Real Estate Deals
26,801Infrastructure Deals
2015 Annual CAIA Corporate�e�o�ni� on Award Winner
As at 5th June 2017
ALTERNATIVES COVERAGE
FIRMS FUNDS FUNDS OPEN TO INVESTMENT
INVESTORSMONITORED
FUNDS WITH PERFORMANCE DEALS & EXITS
27,284 49,361 19,882 14,399 25,374 279,736
HEDGE FUNDS AND BREXIT: ONE YEAR ON
© Preqin Ltd. 2017 / www.preqin.com6 Hedge Fund Spotlight | June 2017
HEDGE FUNDS AND BREXIT: ONE YEAR ONOne year ago, two days before the UK EU referendum, Preqin released a report looking at the views of hedge fund managers on this important vote. At the time, we found that 71% of hedge fund managers predicted that the UK would choose to remain in the EU. However, with a small majority of 52% of the UK populace voting for Brexit, the UK is now on course to leave the EU by March 2019.
Here, we look at the impact of Brexit on the hedge fund industry one year on from the referendum. Preqin surveyed hedge fund managers in June, July and November 2016 and in June 2017 to assess how the UK’s decision to exit the EU is affecting the hedge fund industry in terms of their investments and performance as well as where they choose to be headquartered.
596of the 974 EU-based hedge fund
managers are UK based.
$464bnUK
$121bnEU*
409of the 774 EU-based institutional
investors in hedge funds are UK headquartered.
SIZE OF THE HEDGE FUND INDUSTRY (AS AT MARCH 2017)
*Excluding UK.
Fig. 1: Number of UK- vs. EU*-Based Hedge Fund Launches by Year of Inception, 2000 - 2017 YTD (As at June 2017)
0
50
100
150
200
250
300
350
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017YTD
Source: Preqin Hedge Fund Online
No.
of F
und
Laun
ches
Year of Inception
33 45 5381 84
109 118147 148
172216 217 208 191
170191
164
33
2033
40
42 31
6169
92 88
110
110 94 10592
8973
54
7
EUUK
HEDGE FUNDS AND BREXIT: ONE YEAR ON
© Preqin Ltd. 2017 / www.preqin.com7 Hedge Fund Spotlight | June 2017
17%24%
12%
3%
6%
4%4%
80%70%
81%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Jul-16 Nov-16 Jun-17
Do Not AnticipateChanging Location
Will Change Location tooutside the UK/EU
Will Change Location toElsewhere in the EU
Considering MovingOperations outside the UK
Uncertain
Source: Preqin Hedge Fund Manager Surveys, 2016 - 2017
Prop
ortio
n of
Res
pond
ents
Fig. 2: UK-Based Hedge Fund Manager Views on whether Brexit Will Lead to a Change in Location of Their Business Operations
13% 7%
31%
71% 79%
69%
15% 14%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
All HedgeFund Managers
UK-Based HedgeFund Managers
Rest of EU-BasedHedge Fund Managers
Negative Impact No Impact Positive Impact
Source: Preqin Hedge Fund Manager Survey, June 2017
Prop
ortio
n of
Res
pond
ents
Fig. 3: Hedge Fund Manager Views on the Impact of Brexit on Their Business
Our June 2017 survey reveals that 8% of UK-based hedge fund managers plan to move out of the UK as a direct result of Brexit. Over the second half of 2016 we saw more managers consider an exit from Britain because of Brexit; a year on from the vote these plans have become more concrete for a small number of managers.
Despite this, the majority (81%) of UK-based hedge funds have no plans to leave Britain.
Despite a small, but significant, proportion (8%) of UK-based hedge funds planning to leave the UK as a result of Brexit, 79% of UK-based firms believe Brexit will have no impact on their business, although more UK-based hedge funds believe the impact of Brexit has been positive (14%) for their business than negative (7%).
In contrast, a larger proportion (31%) of managers in the EU (excluding the UK) are experiencing negative consequences as a result of Brexit and none have seen any positive impact on their business operations as a result.
19%
12% 12%
15%14%
11%
22%
8%
0%
5%
10%
15%
20%
25%
Will Make MoreInvestments in
the UK
Will Make FewerInvestments in
the UK
Will Make MoreInvestments in
the EU
Will Make FewerInvestments in
the EU
Nov-16 Jun-17
Source: Preqin Hedge Fund Manager Survey, November 2016 and June 2017
Prop
ortio
n of
Res
pond
ents
Fig: 4: Hedge Fund Manager Views on the Impact of Brexit on Their Future Investments in the UK and EU
9%
27% 32%
17%
33%17%
34% 21%
17%
3%
0%
10%
20%
30%
40%
50%
60%
70%
Impactedover
H1 2016
ImpactedDirectly
after Vote
Impactedover
H2 2016
Impactedover
H1 2017
ExpectedImpact
over Next12 Months
Positive Impact Negative Impact
Source: Preqin Hedge Fund Manager Surveys, 2016 - 2017
Prop
ortio
n of
Res
pond
ents
Fig. 5: Hedge Fund Managers Views on the Impact of Brexit on Their Performance
Although a significant proportion of hedge fund managers in the rest of the EU are experiencing negative consequences as a result of Brexit, hedge fund managers globally have become more bullish in regards to their investments in the region. In our November 2016 survey, more fund managers (15%) planned to reduce their exposure to the EU than planned to increase it (12%); this trend has reversed in 2017, and today we see nearly 3x the number of managers planning to increase their investments in the EU than reduce them (22% vs. 8% respectively).
Similarly, more fund managers (14%) plan increased investment in the UK than to reduce their holdings in the country (11%). However, the proportion of hedge funds planning increased investment in the UK has fallen since November 2016.
Not only are hedge fund managers planning increased investment in the EU and UK as a result of Brexit, they are expecting it to have a positive impact on their performance over the next 12 months, as the ramifications become clearer.
Over the first half of 2017, 34% of fund managers reported that Brexit had impacted their performance, a decline from 53% in H2 2016.
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INDUSTRY NEWS
© Preqin Ltd. 2017 / www.preqin.com9 Hedge Fund Spotlight | June 2017
California-based investors target a range of hedge fund strategies across various locations (see page 12 for more information). Sacramento County Employees’ Retirement System (SCERS) is looking to invest between $25mn and $75mn in new funds over the next 12 months. The pension fund is not targeting any specific fund strategies, and it will look for opportunities on a global basis.
In the coming year, Silicon Valley Community Foundation (SVCF) plans to invest up to $30mn in hedge funds. The foundation is targeting hedge funds that employ long/short equity strategies.
There have been 11 hedge funds launched by North America-based managers since the beginning of 2017, including Cerebellum Capital’s Cerebellum Machine Learning Fund, L.P., which was established in April. The fund uses artificial intelligence to select positions in its portfolio and employs a multi-strategy approach with a focus on US markets.
Legion Partners Special Opportunities V is an activist fund launched in February by Legion Partners Asset Management. It utilizes event driven strategies and takes positions in small- and mid-cap North American companies.
The majority (67%) of all active hedge fund managers are located in North America (see page 3). Preqin’s Hedge Fund Online currently tracks 20 managers headquartered in the region that have
been established in 2017 so far. California-based Arts & Sciences was established earlier this year, led by former Smithwood Advisors Partner Cyrus Hadidi. It plans to pursue a long/short equity strategy and, to a lesser extent, distressed debt and corporate junk bonds.
Parplus Partners, a New York-headquartered hedge fund manager, launched this year with original backing from Ronin Capital. It employs event driven, long/short equity, macro and relative value arbitrage strategies and focuses on the European and US markets.
INDUSTRY NEWSWe review the latest news from the hedge fund industry, including California-based investors planning new investments in the coming year, as well as new North America-based hedge funds launched so far in 2017. Plus, our Chart of the Month looks at industry asset flows since 2015.
RECENT NORTH AMERICA-BASED HEDGE FUND LAUNCHES
CALIFORNIA-BASED INVESTORS PLANNING NEW INVESTMENTS
NEW NORTH AMERICA-BASED FUND MANAGERS
Ass
et F
low
s ($
bn)
Asset flows have experienced a dramatic shift in the past two years. The beginning of 2015 saw significant inflows; however, these turned into outflows for five successive quarters from Q4 2015 and throughout 2016. Despite this, between Q1 2015 and Q2 2016 the total size of the hedge fund industry remained around the $3.15tn mark, despite these changes in asset flows. Notably, the size of the industry has increased significantly in the last three quarters despite hedge funds experiencing heavy outflows: Q4 2016 saw outflows of $43bn while the total size of the industry grew to $3.2tn. This indicates that hedge funds have made strong gains to offset the capital withdrawn by investors.
CHART OF THE MONTH
+28.8
+47.5
+3.9
-8.9-14.3
-19.9
-32.5
-43.1
+19.7
3,000
3,050
3,100
3,150
3,200
3,250
3,300
3,350
3,400
-50
-40
-30
-20
-10
0
10
20
30
40
50
60
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2015 2016 2017
Asset Flows ($bn) Total Size of Industry ($bn)Source: Preqin Hedge Fund Online
Hedge Fund Asset Flows vs. Total Size of Hedge Fund Industry, Q1 2015 - Q1 2017
Total Size of Industry ($bn)
Do you have any news you would like to share with the readers of Spotlight? Perhaps you’re about to launch a new fund, have implemented a new investment strategy, or are considering investments beyond your usual geographic focus?
Send your updates to [email protected] and we will endeavour to publish them in the next issue.
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THE FACTS
© Preqin Ltd. 2017 / www.preqin.com10 Hedge Fund Spotlight | June 2017
PERFORMANCE BENCHMARKSFig. 1: Summary of Preliminary May 2017 Performance Benchmarks (Net Return, %)*
May-17 Apr-17 2017 YTD 12 Months
Hedge Funds 0.23 0.79 4.35 10.31HF - Equity Strategies 0.46 1.00 5.85 12.34HF - Event Driven Strategies 0.24 1.02 4.65 14.35HF - Relative Value Strategies -0.44 0.25 1.25 4.57HF - Macro Strategies -0.13 0.12 1.18 5.25HF - Multi-Strategy 0.16 0.75 4.18 9.00HF - Credit Strategies 0.21 0.54 3.40 9.37Activist 0.32 1.11 5.25 15.44Volatility 0.60 0.61 3.16 7.14Discretionary 0.14 0.91 4.72 11.75Systematic 0.39 0.66 3.67 7.63HF - North America -0.15 0.63 3.27 11.54HF - Europe 1.00 1.17 5.20 8.81HF - Asia-Pacific 0.83 0.62 6.14 9.89HF - Developed Markets 0.34 0.59 2.94 8.74HF - Emerging Markets 0.05 1.34 6.93 14.04HF - Emerging (Less than $100mn) 0.10 0.70 4.11 10.59HF - Small ($100-499mn) 0.16 0.82 4.15 10.20HF - Medium ($500-999mn) 0.81 0.90 4.43 10.94HF - Large ($1bn plus) 0.52 0.84 4.44 9.66Funds of Hedge Funds 0.23 0.53 2.04 4.22FOHF - Equity Strategies 0.40 0.95 4.77 6.84FOHF - Multi-Strategy 0.15 0.44 2.36 4.59Funds of CTAs -0.74 0.15 -0.95 -2.91FOHF - USD 0.16 0.54 2.84 5.21FOHF - EUR 0.36 0.41 0.16 0.93Alternative Mutual Funds 0.08 0.32 2.05 4.19UCITS 0.46 0.61 3.47 5.22UCITS - Equity Strategies 0.77 0.92 5.79 7.94UCITS - Relative Value Strategies 0.50 0.19 1.45 1.42UCITS - Macro Strategies 0.10 0.25 1.51 3.73UCITS - USD 0.72 0.85 4.96 6.58UCITS - EUR 0.19 0.48 2.60 3.97CTAs 0.54 -0.40 -0.03 -0.79Discretionary -0.18 1.27 0.82 3.12Systematic 0.63 0.32 0.42 -0.22CTA - USD 0.30 0.32 0.21 -0.23CTA - EUR 0.76 0.90 1.54 1.75
Source: Preqin Hedge Fund Online
Hedge funds generated a small positive return (+0.23%) for May 2017, the seventh consecutive month of positive
performance. Equity strategies funds were the biggest winner for May having posted returns of +0.46%, helping bring the Preqin All-Equity Strategies Hedge Fund benchmark to +5.85% for 2017 YTD, the highest of any top-level strategy. Europe- and Asia-Pacific-focused funds also performed well in May returning +1.00% and +0.83% respectively.
Returns across various currency denominations for May were mixed, with JPY-denominated funds generating the highest return of +1.01%. This comes after the currency depreciation of the Japanese yen increased external demand for exports, helping to boost growth of the Japanese economy. Meanwhile the corruption scandal surrounding Brazilian President Michel Temer may have contributed to the loss posted by Brazilian real funds of -1.17%.
10.8%
5.1%
5.7%8.6%
17.0%
-5%
0%
5%
10%
15%
20%
Jun-
16
Jul-1
6
Aug
-16
Sep-
16
Oct
-16
Nov
-16
Dec
-16
Jan-
17
Feb-
17
Mar
-17
Apr
-17
May
-17
USD EUR GBP JPY BRL
Source: Preqin Hedge Fund Online
Cum
ulat
ive
Net
Ret
urn
Fig. 2: 12-Month Cumulative Returns of Hedge Funds by Currency Denomination (As at May 2017)
*Please note, all performance information includes preliminary data for June 2017 based on net returns reported to Preqin in early May 2017. Although stated trends and comparisons are not expected to alter significantly, final benchmark values are subject to change.
THE FACTS
© Preqin Ltd. 2017 / www.preqin.com11 Hedge Fund Spotlight | June 2017
ACTIVIST FUND PERFORMANCE
*Please note, all performance information includes preliminary data for June 2017 based on net returns reported to Preqin in early May 2017. Although stated trends and comparisons are not expected to alter significantly, final benchmark values are subject to change.
5.42%
15.61%
9.98% 10.02%
5.97%
4.36%
10.33%
5.34%
7.73%
4.00%
0%
2%
4%
6%
8%
10%
12%
14%
16%
2017 YTD 12 Months 3-YearAnnualized
5-YearAnnualized
3-YearVolatility
Activist Hedge Funds All Hedge Funds
Source: Preqin Hedge Fund Online
Net
Ret
urn
Fig. 1: Performance of Activist Hedge Funds vs. All Hedge Funds (As at May 2017)*
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
Jan-
11M
ay-1
1
Sep-
11
Jan-
12
May
-12
Sep-
12
Jan-
13M
ay-1
3
Sep-
13
Jan-
14M
ay-1
4
Sep-
14
Jan-
15M
ay-1
5
Sep-
15
Jan-
16
May
-16
Sep-
16
Jan-
17
Activist Hedge Funds S&P 500 PR Index
Source: Preqin Hedge Fund Online
12-M
onth
Net
Ret
urn
Fig. 2: Rolling 12-Month Returns: Activist Hedge Funds vs. S&P 500 PR Index
0%
5%
10%
15%
20%
25%
Jan-
14
Apr-
14
Jul-1
4
Oct
-14
Jan-
15
Apr-
15
Jul-1
5
Oct
-15
Jan-
16
Apr-
16
Jul-1
6
Oct
-16
Jan-
17
North America Europe Asia-Pacific
Source: Preqin Hedge Fund Online
Thre
e-Ye
ar A
nnua
lized
Ret
urn
Fig. 3: Rolling Three-Year Annualized Returns of Activist Hedge Funds by Geographic Focus
-18%
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
Mar
-11
Jun-
11Se
p-11
Dec
-11
Mar
-12
Jun-
12Se
p-12
Dec
-12
Mar
-13
Jun-
13Se
p-13
Dec
-13
Mar
-14
Jun-
14Se
p-14
Dec
-14
Mar
-15
Jun-
15Se
p-15
Dec
-15
Mar
-16
Jun-
16Se
p-16
Dec
-16
Mar
-17
Activist Hedge Funds S&P 500 PR Index
Source: Preqin Hedge Fund Online
Dra
wdo
wn
Size
Fig. 4: Drawdowns of Activist Hedge Funds vs. S&P 500 PR Index (As at May 2017)
Fig. 5: Sample Activist Hedge Funds Launched in 2017
Fund Inception Date Geographic Focus Manager Location
Bentham IMF 1 Feb-17 North America US
Fir Tree Capital Opportunity Master Fund III Jan-17 North America US
Standard General Fund II Feb-17 North America US
Source: Preqin Hedge Fund Online
Fig. 6: Top Performing Activist Hedge Funds by 12-Month Net Return (As at May 2017)*
Fund Manager Manager Location 12-Month Net Return (%)
Guepardo Master Fund Guepardo Investimentos Brazil 47.27
Doric Asia Pacific Small Cap Fund - Series 1 (Base) Doric Capital Corporation Hong Kong 45.06
FAMA Brazil Cayman Feeder Fund FAMA Investimentos Brazil 35.22
UG Hidden Dragon Special Opportunity Fund - Class A UG Investment Advisers Taiwan 34.05
Teleios Global Opportunities Fund, Ltd Teleios Capital Partners Switzerland 30.25
Source: Preqin Hedge Fund Online
We examine the performance of activist hedge funds, including launches in 2017 and top performing activist hedge funds by 12-month return.
THE FACTS
© Preqin Ltd. 2017 / www.preqin.com12 Hedge Fund Spotlight | June 2017
CALIFORNIA-BASED HEDGE FUND INVESTORSWe examine the make-up of hedge fund investors based in California by type, location, strategy preference and more.
71%
54% 50%43% 40% 38%
33% 30%
20% 19%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Long
/Sho
rt E
quity
Even
t Driv
en
Mul
ti-St
rate
gy
Long
/Sho
rt C
redi
t
Dis
tres
sed
Fixe
d In
com
e
Mac
ro
Rela
tive
Valu
eAr
bitr
age
Man
aged
Fut
ures
/CT
A
Equi
ty M
arke
tN
eutr
al
Source: Preqin Hedge Fund Online
Prop
ortio
n of
Inve
stor
s
Strategy Preference
Fig. 3: Strategy Preferences of California-Based Investors Active in Hedge Funds
Fig. 4: Five Largest California-Based Investors by Current Allocation to Hedge Funds
Investor Type Location
Current Allocation to Hedge Funds
($bn)
Regents of the University of California
Public Pension Fund Oakland 6.1
Stanford Management Company
Endowment Plan Stanford 5.2
CTC myCFO Multi-Family Office Palo Alto 5.0
California State Teachers' Retirement System (CalSTRS)
Public Pension Fund Sacramento 3.6
Kaiser Permanente Pension Plan
Private Sector Pension Fund Oakland 2.6
Source: Preqin Hedge Fund Online
Source: Preqin Hedge Fund Online
Fig. 1: California-Based Hedge Fund Investors by TypeFig. 2: Number of Active Hedge Fund Investors based in the Top Five Locations in California
Source: Preqin Hedge Fund Online
CA
L I FO
RN
I A
San Francisco
19%65
Los Angeles
19%44
San Diego
19%18
Menlo Park
19%12
Palo Alto
19%14
30%
13%
12%10%
7%
4%
10%
15%
PrivateWealth
Institutional
Foundation
Endowment Plan
Private Sector Pension Fund
Fund of Hedge Funds Manager
Public Pension Fund
Other
Family Office
Wealth Manager
Geographic Preferences of California-Based Investors Active in Hedge Funds:
Fund Type Preferences of California-Based Investors Active in Hedge Funds:
California-Based Hedge Fund Investors that Will Invest with Emerging Managers:
91%
44%38%
NorthAmerica
Europe Asia
50%
32%
18%
DirectBoth Direct and Fund of Hedge FundsFund of Hedge Funds
31%
23%
46%
Will InvestConsider InvestingWill Not Invest
HOW PREQIN CAN HELP YOU FUNDRAISE IN 2017
Although there are more institutional investors than ever currently investing in hedge funds – over 5,100 globally – fundraising in 2017 is undoubtedly challenging. The net outflows of $110bn seen in 2016 look set to continue in 2017: twice as many investors plan to reduce their exposure to hedge funds over the coming year than plan to increase it.
Despite this, there are opportunities to grow your fund over the course of 2017 – with industry-leading data and tools, Preqin will help you in finding those investors looking for new hedge funds today.
We have
250multilingual research analysts based in the US,
London, Hong Kong and Singapore.
Each month our team have thousands of conversations with investors to find out more
about their alternative investments.
With researchers on the ground, Preqin is the first to find out the latest hedge fund searches
among the
5,100+institutions tracked by Preqin globally.
Our fully searchable database allows you to target those investors interested in your fund
and to find contact details for more than
12,000key decision makers at these institutions.
9out of the top
10hedge funds that saw the largest
inflows in 2016 rely on Preqin data.
6,000investment professionals in
90+countries use Preqin’s data.
56754613
06801970
41574302
86045684
13279568
41025486
15423148
65749801
64535790
46830241
86304726
83185264
85790149
56575168
94647864
alternative assets. intelligent data.
2.5xPreqin clients raised more than twice
as much capital in 2016 than all other funds*.
*Of the firms that saw inflows in 2016, Preqin clients, on average, raised $116mn compared to $48mn for all other funds.
PREQIN IS HELPING RAISE CAPITAL FOR HEDGE FUNDS TODAY
HOW PREQIN HELPS TO RAISE CAPITAL FOR HEDGE FUNDS
Investors have indicated they are looking for up to
800new hedge funds in the
next 12 months.
The average hedge fund investor looking to make new investments in the next 12 months
plans to invest between
$62mnand
$85mn
With over
5,100investors profiled on the Preqin platform, we
can help pinpoint those investors that are looking for you.
798 799 801 802800
Forward-looking data on future plans and full
investment history of each institution.
Strategy, fund type and geographic preferences for
each institution.
AUM and track record requirements of investors
in hedge funds.
Full contact details for key decision makers, including
the best method to approach the investor.
Fund-level investments on a named basis to see who they have invested
with and how that fund is performing.
HOW PREQIN CAN HELP YOU FUNDRAISE IN 2017
Hedge Fund Online is Preqin’s award-winning hedge fund information resource, incorporating all of our hedge fund data, intelligence and functionality, providing you with the most comprehensive coverage of the asset class available.
Register for demo access to find out how Preqin’s Hedge Fund Online can help your business:
www.preqin.com/demo
PREQIN CAN HELP RAISE CAPITAL FOR YOUR HEDGE FUNDS IN 2017
TAILOR YOUR PITCH USING PREQIN DATA
CONTACT US
alternative assets. intelligent data.
THE FACTS
© Preqin Ltd. 2017 / www.preqin.com15 Hedge Fund Spotlight | June 2017
UCITS HEDGE FUNDSWe examine the latest data on UCITS hedge funds, including launches and liquidations, fund managers over time and assets under management.
10 15 630 38
55 60
128
176
141
103123
137 141
101
16-21
-57 -63 -72 -53 -5
-100
-50
0
50
100
150
200
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
YTD
Launches Liquidations
Source: Preqin Hedge Fund Online
Fig. 1: UCITS Hedge Fund Launches and Liquidations over Time, 2002 - 2017 YTD (As at June 2017)
37 45 48 62 77102
135
179
250
310333
363388
420 436 440
0
50
100
150
200
250
300
350
400
450
500
Dec
-02
Sep-
03
Jun-
04
Mar
-05
Dec
-05
Sep-
06
Jun-
07
Mar
-08
Dec
-08
Sep-
09
Jun-
10
Mar
-11
Dec
-11
Sep-
12
Jun-
13
Mar
-14
Dec
-14
Sep-
15
Jun-
16
Mar
-17
Source: Preqin Hedge Fund Online
Fig. 2: Active UCITS Hedge Fund Managers over Time, 2002 - 2017 YTD (As at June 2017)
54%
32%
8%2% 4%
Luxembourg
Ireland
France
Germany
Other
Source: Preqin Hedge Fund Online
Fig. 3: Active UCITS Hedge Funds by Domicile (As at June 2017)
40%
12%4%
15%
10%
7%
12%1% Equity Strategies
Macro Strategies
Event Driven Strategies
Credit Strategies
Relative Value Strategies
Managed Futures/CTA
Multi-Strategy
Niche Strategies
Source: Preqin Hedge Fund Online
Fig. 4: Active UCITS Hedge Funds by Core Strategy (As at June 2017)
57%
29%
6% 8%
0%
10%
20%
30%
40%
50%
60%
Less than $100mn $100-499mn $500-999mn $1bn or More
Source: Preqin Hedge Fund Online
Fig. 5: Active UCITS Hedge Funds by Assets under Management (As at June 2017)
No.
of L
aunc
hes/
Liqu
idat
ions
Year of Inception/Liquidation
No.
of A
ctiv
e U
CITS
Fun
d M
anag
ers
Fig. 6: Hedge Fund Fees: UCITS vs. Commingled Funds
Structure Mean Management Fee
Mean Performance Fee
Commingled Hedge Funds 1.57% 19.33%
UCITS Hedge Funds 1.29% 16.05%
Source: Preqin Hedge Fund Online
Assets under Management
Prop
ortio
n of
Fun
ds
Kathleen Kennedy Townsend, Managing Director, The Rock Creek Group
Stuart Fiertz, Co-Founder and President, Cheyne Capital Management
Bruce Richards, Co-Managing Partner and CEO, Marathon Asset Management
Briant Lahart, Managing Director, Asset Management, Abbot Downing
Ed Rzeszowski, Managing Director, BlackRock
Early Confirmed Speakers include:
Preqin subscribers receive 15% discount using code ‘PQ15’
www.imn.org/totalalts | [email protected] | (212)224-3207
ToTal alTs 2017 september 7-8, 2017 | san Francisco, Ca
an exploration of alternative investments
THE FACTS
© Preqin Ltd. 2017 / www.preqin.com17 Hedge Fund Spotlight | June 2017
FUND SEARCHES AND MANDATES
52%
36%
12%
North America
Europe
Asia-Pacific & Rest ofWorld
Source: Preqin Hedge Fund Online
Fig. 1: Hedge Fund Searches Issued by Investor Location, May 2017
71%
10%
4%3%
2%
2%2%
2%2%
2%Fund of Hedge FundsManagerFamily Office
Asset Manager
Private Sector Pension Fund
Bank
Corporate Investor
Insurance Company
Investment Company
Public Pension Fund
Wealth Manager
Source: Preqin Hedge Fund Online
Fig. 2: Hedge Fund Searches Issued by Investor Type, May 2017
58%
27%23%
19% 19%15% 15% 15% 15%
12%
0%
10%
20%
30%
40%
50%
60%
70%
Long
/Sho
rtEq
uity
Even
t Driv
en
Man
aged
Fut
ures
/CT
A
Fixe
d In
com
e
Mac
ro
Dis
tres
sed
Long
Bia
s
Long
/Sho
rtCr
edit
Mul
ti-St
rate
gy
Com
mod
ities
Source: Preqin Hedge Fund Online
Prop
ortio
n of
Fun
d Se
arch
es
Fig. 3: Hedge Fund Searches Issued by Strategy, May 2017
Subscribers to Hedge Fund Online can click here to view detailed profiles of 392 institutional investors in hedge funds actively searching for new investments via the Fund Searches and Mandates feature on Preqin’s Hedge Fund Online.
Preqin tracks the future investment plans of investors in hedge funds, allowing subscribers to source investors actively seeking to invest capital in new hedge fund investments.
Not yet a subscriber? For more information, or to arrangea demonstration, please visit: www.preqin.com/hedge
DATA SOURCE:
Fig. 4: Sample Hedge Fund Searches Issued, May 2017
Investor Type Location Investment Plans for Next 12 Months
Optimized Portfolio Management
Investment Company Sweden
The investment company plans to invest up to £40mn in 5-7 funds over the coming year on a global basis, including macro, long/short equity, managed futures/CTA, event driven and equity market neutral funds.
AlphaWealth Fund of Hedge Funds Manager South Africa
The fund of hedge funds plans to add five new funds to its portfolio in the next 12 months, allocating a total of ZAR 80mn specifically to bond and fixed income strategies. It will focus its investments on emerging markets domestically and globally, particularly looking at Europe, Japan and China.
CTC myCFO Multi-Family Office US
The California-based family office plans to invest between $300mn and $400mn both directly in hedge funds and in funds of hedge funds over the next year. It will focus on long/short equity, relative value arbitrage and event driven strategies on a global basis. It will invest with a mix of both new and existing managers.
Source: Preqin Hedge Fund Online
We analyze the fund searches and mandates issued by hedge fund investors in May 2017.
CONFERENCES
© Preqin Ltd. 2017 / www.preqin.com18 Hedge Fund Spotlight | June 2017
CONFERENCESJULY 2017
Conference Dates Location Organizer Preqin Speaker Discount Code
Alternative Investment Consultants Summit 20 July 2017 Stamford, CT
Investment Management
Institute - $300 Discount -
IMICT165
Family Office & Private Wealth Management Forum 2017 24 - 26 July 2017 Newport, RI Opal Financial
Group - -
SEPTEMBER 2017
Conference Dates Location Organizer Preqin Speaker Discount Code
Total Alts 2017 7 - 8 September 2017 San Francisco, CA IMN TBC -
AIMA Australia Annual Forum 2017 12 September 2017 Sydney AIMA - -
CTA Expo Chicago 14 September 2017 Chicago, MA CTA Expo Amy Bensted -
Cap Intro: L/S Equity | Event Driven Alternative Investing 18 September 2017 New York Catalyst Financial
Partners - -
Ai CEO Institutional Investment Summit 2017 18 September 2017 New York Africa Investor - -
AIMA Canada Investor Forum 2017 25 September 2017 Montréal AIMA - -
UCITS & AIDMD London 26 - 27 September 2017 London KNect365 - -
Channel Islands Funds Forum 2017 27 September 2017 Jersey BL Global Amy Bensted Tom Carr -
Conference Dates Location Organizer Preqin Speaker Discount Code
Australian Investors Summit 2017 5 - 6 October 2017 Sydney marcus evans Summits - -
Latin Private Wealth Management Summit 9 - 10 October 2017 Cancún marcus evans
Summits - -
FundForum Middle East & Africa 9 - 11 October 2017 Dubai KNect365 - -
Cap Intro: Credit | Fixed Income Alternative Investing 16 October 2017 New York Catalyst Financial
Partners - -
C4K Investors Conference 18 - 19 October 2017 Toronto Capitalize for Kids - -
Family Office & Private Wealth Forum – West 25 - 27 October 2017 Napa, CA Opal Financial
Group - -
Private Wealth Management Summit APAC 2017
30 October - 1 November 2017 Macao marcus evans
Summits - -
OCTOBER 2017
Conference Dates Location Organizer Preqin Speaker Discount Code
Hedge Fund Investor Leadership Summit 2 - 3 November 2017 New York Agecroft Partners - -
9th Annual Women’s Alternative Investment Summit (WAIS) 2 - 3 November 2017 New York Falk Marques Group - -
Quant World Canada 2017 9 November 2017 Toronto Terrapinn - -
NOVEMBER 2017
CONFERENCES
DATE: 7 - 8 September 2017
INFORMATION: www.imn.org/totalalts
LOCATION: San Francisco, CA
ORGANIZER: IMN
Total Alts will reflect the growth and dynamism of the wider world of alternatives and will provide LPs with access to insights from the sharpest minds in private equity, venture capital, private debt, real assets, hedge funds and so much more!
Join us this September 7-8 at the Ritz-Carlton in San Francisco, as we explore and explain the ever-growing and evolving alternative investments landscape.
TOTAL ALTS 2017
ACCESS FREE CONFERENCE SLIDE DECKS AND PRESENTATIONS
Preqin attends and speaks at many different alternative assets conferences throughout the year, covering topics from infrastructure fundraising trends to alternative UCITS.
All of the conference presentations given by Preqin speakers, which feature charts and league tables from Preqin’s online products, can be viewed and downloaded from Preqin’s Research Center Premium, for free.
For more information, and to register for Preqin’s Research Center Premium, please visit:
www.preqin.com/rcp
DATE: 18 September 2017
INFORMATION: http://catalystforum.com/events/ls-equity-event-alternative-investing/
LOCATION: New York City
ORGANIZER: Catalyst Financial Partners
Catalyst Cap Intro events are investor driven and transactional events that host alpha-oriented investment managers and institutional grade investors that are introduced to each other with a view to become investment partners.
This Catalyst Cap Intro Event focuses only on the L/S Equity | Event Driven Investing space. Strategies covered include, among others: fundamental research, global equity, merger arbitrage, small/micro caps, regional/international, industry specific, trend/signals, as well as event driven funds based on behavior, public reports, litigation, adverse news, structural change, insider filings, and more.
CATALYST CAP INTRO: L/S EQUITY | EVENT DRIVEN INVESTING