EuroHedge billion dollar firms shrink 12% in first half

By Nick Evans

In the global decline of hedge fund assets, Europeans have fared worse than either the much bigger U.S. industry or the smaller Asian one. European hedge fund assets have fallen by almost 40% from their peak of $575 billion in mid-2008, to about $350 billion. As in the U.S., the decline has slowed this year, with assets down about 12% since January. Still this year, the rate of decline in Europe is steeper than in either the U.S. or Asia, where assets have fallen between 4% and 5% for the same period. Since the 2008 peak, U.S. hedge funds are down 35% and Asia’s assets have dropped by 38%.

Many of the biggest European losses have come among the largest groups, including GLG Partners, Marshall Wace Asset Management, The Children’s Investment Fund, Polygon Investment Partners, RAB Capital and Toscafund Asset Management, all of which lost more than half of their assets in the past year.

As a result, the list of European hedge fund groups with assets of more than $5 billion now numbers just 12 firms—compared with 26 at the end of June last year. Even those firms with strong performance have lost assets this year, as European investors have continued to withdraw capital from hedge funds.

For the first six months of 2009, Brevan Howard Asset Management, the global macro hedge fund group led by Alan Howard and one of the outstanding performers of recent years, maintained its position as the largest European hedge fund firm. Brevan Howard has $22 billion in European assets, down slightly from $26 billion in mid-2008, despite strong performance during that time. The firm’s global macro flagship—which was up by more than 20% last year and is up again by some 15% this year—makes up $19 billion of the firm’s assets. At that size the fund is tied with the Man Group’s huge AHL systematic trend-following program—which also managed assets of $19 billion at the end of June—for the title of Europe’s single largest hedge fund.

Like all the big CTA groups, AHL has found the going this year a little tough after the stellar performance in 2008. Having returned more than 30% in 2008, AHL was down by 14% in the first half of this year. BlueCrest Capital Management, also with substantial gains during the past two years, is the third largest European hedge fund group with assets of just over $12 billion at the end of June. In 2008, BlueCrest’s star fund was BlueTrend, the firm’s trend-following systematic trading strategy managed by Leda Braga, which returned more than 40%. This year, however, the performance has come from the main trading strategies, with BlueCrest Capital International, managed by the firm’s co-founder, Mike Platt, up by almost 35% year to date.

Lansdowne Partners, which is in fourth position with assets of just under $12 billion at the end of June, has also had a strong year with its flagship U.K. Equity strategy, which runs some $8 billion of the firm’s assets and gained more than 18% by August 31. Lansdowne European Equity was up more than 20% by August 31, and Lansdowne Global Financials rose more than 40% at that time.

Yet assets at BlueCrest and Lansdowne are both down by around 25% to 30% from their peak in 2008 as a result of the tidal wave of redemptions.

Winton Capital Management, which is posting negative performance this year after a bang-up 2008, is now the fifth largest European hedge fund group, surging ahead of GLG. The latter has had one of the biggest drops, with hedge fund assets plunging from a peak of over $18 billion in mid-2008 to less than $10 billion by mid-2009.

Rotterdam-based CTA group Transtrend is one of the few of the $5 billion-plus European players whose assets have grown this year. Transtrend’s assets have grown to $8.1 billion in mid-2009 from just under $6 billion in mid-2008.

The Children’s Investment Fund, the once-hot activist fund run by Chris Hohn, also has fallen on hard times, shrinking by at least half to an estimated $8 billion. It is returning some capital to investors as part of an overhaul.

The list of $5 billion-plus firms is rounded off by Sloane Robinson, which has also come storming back this year, along with emerging market specialist Spinnaker Capital Group and global equity firm Horseman Capital Management, the outstanding long/short equity performer in 2008 but whose bearish stance has led it to lose money in 2009.

Nick Evans is the editor of EuroHedge

TOP HEDGE FUND FIRMS IN EUROPE

* estimate **excludes credit and Asian funds run outside Europe
Source: EuroHedge Database Asset figures as at June 30, 2009
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