Who’s up and who’s down in our exclusive list of top hedge funds. Quants dominate overall, but a value manager ranks No. 1.
The winner of Barron’s Penta’s 2017 ranking of the Top 100 Hedge Funds doesn’t tick a lot of the boxes for the typical big investor. There’s one mark, however, that would catch any investor’s eye: performance.Penta Top 100 Hedge Funds
Amid wildly erratic hedge fund results, our victor, Madrid-based Alantra Asset Management’s $390 million EQMC Europe Development Capital fund (Class A), posted a 26% annualized return net of expenses from 2014 through 2016. In contrast, the average hedge fund’s annualized three-year return didn’t quite reach 3% in that time, according to BarclayHedge’s return database. EQMC’s gains were nearly three times those of the surging Standard & Poor’s 500 index. To learn more about Alantra and EQMC’s strategy, read our profile of and interview with Alantra CEO Jacobo Llanza and the fund’s overseer, Francisco de Juan. (See related story, “The Winner’s Picks.”)
Alantra and its hedge fund stand out from the hedge fund crowd in a lot of ways. The small fund doesn’t sell stocks short, use leverage, or employ confrontational tactics to get its way. It borrows heavily from private equity’s tool kit to work with managements to improve results.
Another distinction: The asset manager and its key fund take an active, fundamental approach in an era when quantitative investing is booming among leading hedge funds. Barron’s Penta’s champ a year ago, Hong Kong–based Parametrica Asset Management, guided by Xiongwei Ju, who holds a doctorate in finance, uses an equity market-neutral strategy based on statistical arbitrage across many global markets. Parametrica finished at No. 5 this year.
Other quant-based firms whose various funds again excelled this year include a Donald Trump favorite, Robert Mercer’s Renaissance Technologies (Nos. 6 and 24); math-and-science talents John Overdeck and David Siegel’s Two Sigma Investments (No. 11); quant pioneer David Shaw’s D.E. Shaw Group (Nos. 18 and 32); and Ken Griffin’s Citadel (Nos. 30 and 37).
Reflecting the difficulty of generating consistent returns in recent markets, a record 61 firms on the Barron’s Penta Top 100 list this year didn’t rank a year ago. In one of many cases of rapidly changing fortunes, a fund we monitor, Mudrick Distressed Opportunity, posted an impressive 39% gain in 2016, following a 26% drop in 2015, preventing it from making our ranking, which is based on three-year returns.
Despite some spectacular 2016 returns like our No. 2 finisher Mangrove Partners’ 51% gain, hedge fund performance continues to disappoint. The average return of the 100 funds on 2017’s list is 11.78%, versus nearly 17% a year ago.
The low and volatile returns are having an adverse effect on clients. Pension funds and financial institutions are seeking incremental returns to meet their own obligations; many funds simply aren’t delivering them. Among the big institutional investors to announce that they would curtail hedge fund investments last year were MetLife, American International Group, and the New Jersey State Investment Council. That makes it harder for hedge funds to refill their coffers. “It will continue to be difficult for fund managers to raise capital, and keeping what you’ve got will be tough,” says Amy Bensted, head of hedge fund products at Preqin, a London-based alternative-asset research firm.....MORE
Alantra Asset Management’s EQMC Decelopment Capital fund, based in Madrid, took top honors in a tough year in which quantitative funds provided the most consistency.
|Rank 2016||Rank 2015||Fund||Fund Assets (mil)||Fund Strategy||3-Yr Compound Annual Return||2016 Return||Firm Name / Location||Firm Assets ($M)|
|1||N.R.||EQMC Europe Development Capital Class A||$390||European Small-Cap Activist||26.21||26.39||Alantra Asset Management / Madrid||3,300|
|2||N.R.||Mangrove Partners||682||Equity Long/Short||23.34||50.58||Mangrove Partners / New York||780|
|3||19||Segantii Asia-Pacific Equity Multi-Strategy||1,923||Asia Multistrategy||23.06||6.69||Segantii Capital Management / Hong Kong||1,923|
|4||71||Sherborne Investors||705||Activist / Event Driven||20.97||27.80||Sherborne Investors Management / New York||705|
|5||1||Parametrica Global Master||400||Equity Market Neutral||18.35||0.35||Parametrica Asset Management / Hong Kong||666|
|6||37||Renaissance Institutional Equities||14,935||Quantitative Equity Long-Bias||17.75||21.46||Renaissance Technologies / New York||38,800|
|7||N.R.||Knight Vinke Institutional Partners International||860||Equity Long-Only Activist||17.68||46.18||Knight Vinke Asset Management / Monaco||860|
|8||N.R.||Credence Global Class C||326||Relative Value Arbitrage||17.33||11.64||Splendor Capital Management / Hong Kong||407|
|9||N.R.||Verde FIC FIM||434||Multistrategy||17.24||15.13||Verde Asset Management / Sao Paulo||9,600|
|10||27||ISAM Systematic (USD)||1,730 1||CTA||17.03||-12.17||ISAM / London||2,030|
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