The Billion Dollar Club of hedge fund investors continues to expand, as new members join their ranks and total combined allocations to the asset class rise, according to Preqin.
This group of those investors allocating USD1 billion or more to the industry has seen a net increase of eight members in the 12 months to June 2017, and now stands at 242 institutions.
Furthermore, the level of capital invested in hedge funds by these investors has grown by 6 per cent over the past year, and now stands at USD805 billion. The Billion Dollar Club of investors collectively accounts for almost a quarter of the total institutional capital allocated to the asset class.
Over the course of the past year, 36 institutional investors have entered the Billion Dollar Club and 28 have exited – a total of 242 investors now invest USD1 billion or more in hedge funds.
Collectively, the Billion Dollar Club allocate USD805 billion to the asset class, a 6 per cent increase from June 2016 when these investors allocated USD763 billion to hedge funds. This represents 24 per cent of total hedge fund AUM.
Public pension funds account for the largest proportion (28 per cent) of capital allocated by the Billion Dollar Club, and represent the highest number of new entrants to the club (11) over the past 12 months.
North America accounts for the greatest proportion (61 per cent) of capital invested in hedge funds by the Billion Dollar Club, while Europe-based investors account for just over a fifth (21 per cent), and Asia accounts for 9 per cent.
Members of the Billion Dollar Club give greater weight to hedge funds within their portfolios. They typically allocate 16.0 per cent of their total AUM to hedge funds, compared to 14.5 per cent among all other investors.
However, this represents a decrease over the past 12 months: the average allocation to hedge funds of a Billion Dollar Club member was 16.8 per cent as of June 2016.
Overall, there has been a net reduction in allocations in the past 12 months: 37 per cent of Billion Dollar Club members have decreased their allocations in the past year, while 28 per cent increased them.
Amy Bensted (pictured), head of hedge fund products at Preqin, says: “Investor outflows dominated the narrative surrounding the hedge fund asset class in 2016. However, despite some high-profile redemptions and withdrawals in recent years, the group of the largest hedge fund investors continues to grow in both number and influence. The past 12 months have seen a net increase of eight institutions, and total allocations from these investors now exceed USD800 billion collectively.
“The Billion Dollar Club consequently has great influence over the industry; one in every four dollars in hedge funds today comes from this group of 242 institutions. These investors are increasingly using their collective might to lobby hedge fund managers to improve the alignment of interests between the two parties. At a time when fund terms and conditions are in the spotlight, this will ultimately improve alignment for all institutional investors in the asset class.”
