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The 2003 Hedge Fund 100

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"Plan sponsors are craving some kind of investment that is heavily alpha-oriented. And there's nothing more alpha than hedge funds," says Carrie McCabe, president of McCabe Advisors, a New York­based adviser to hedge funds and their investors.

With pension funds battling slumping stock markets and low bond yields to meet actuarial assumptions, they are -- no surprise -- increasingly adopting absolute-return strategies. Thus, as in the pension and mutual fund management businesses, scale is beginning to count in the hedge fund industry. Larger managers can afford to spend more on marketing and other services to attract that institutional cash. Much of the new pension money enters the market through funds of hedge funds (Institutional Investor, December 2002), which in turn often funnel it to larger managers. "As funds of funds get larger, they're forced to go to larger managers to get a meaningful allocation," says Patrick Egan, chief investment officer at Attalus Capital, a $350 million fund of hedge and private equity funds in Bala Cynwyd, Pennsylvania.

Even when institutions invest directly with single-manager funds, many choose big organizations to get access to risk management and other services like portfolio construction. These factors help explain the growth of firms in the 2003 Hedge Fund 100, Institutional Investor's second annual ranking of single-manager hedge fund firms, topped by Caxton Associates, which jumps from 11th place in 2002 to lead the industry with $10 billion under management. Second-place honors go to Andor Capital Management, with $9.6 billion, up from third and $7.5 billion last year. Citadel Investment Group takes third place with $8.5 billion, up from fifth and $7.15 billion in 2002.

This year's Hedge Fund 100 ran a total of $340 billion at year-end 2002, or 55 percent of the $622 billion managed by all single-manager funds, according to estimates by Hedge Fund Research in Chicago. Last year's Hedge Fund 100 ran $264 billion, or 49 percent of HFR's estimated 2001 universe of $536 billion. This year's inclusion of managed accounts, excluded last year, explains some, but not all, of the growth.

There are 28 new firms in this year's Hedge Fund 100, including old-line power Wellington Management (No. 30) and macro player Rubicon Fund Management (No. 55). Gone are such standouts as P.A.W. Capital Partners (No. 57) and John Meriwether's JWM Partners (No. 88). Some firms that dropped off the list, like American Express Asset Management Group (No. 78) and Shaker Investments (No. 71), suffered asset outflows after key portfolio managers left. The same fate befell Lazard Asset Management, but it remains on the Hedge Fund 100 at No. 39 because portfolio manager William von Mueffling and others departed after the December 31, 2002, cutoff for this year's ranking.

Our listings provide each manager's total hedge fund assets (before leverage) and, where possible, breakdowns at the individual fund level with one-year returns (net of fees). All data are as of year-end 2002 unless otherwise noted. Performance for funds launched after January 2, 2002, reflects actual net returns since inception, as footnoted. Data were gathered from questionnaires completed by hedge fund managers and supplemented by extensive staff research. In some cases, asset totals or returns represent II estimates. We list a maximum of five funds per firm. Additional information can be found on our Web site, at www.institutionalinvestor.com.

We have excluded funds of funds, funds that are subadvised by a third party (subadvised funds are credited to the actual manager) and assets managed in collateralized bond and debt obligations. Also excluded: private equity funds and vehicles that resemble private equity funds.

Where we were unable to determine certain data for a fund or firm, we omitted that information. In some cases, managers have rolled multiple funds run in a single style (onshore and offshore versions of the same fund, for example) into one entity and reported composite figures for assets and returns.

If we missed your firm this year, please contact us at HF100@iimagazine.com so we can consider you for the 2004 list. Some firms that completed our questionnaire were too small to make the list. These firms are listed on our Web site.


This ranking was compiled under the direction of Senior Editor Jane B. Kenney and Assistant Managing Editor for Research Lewis Knox (who wrote the overview), with assistance from Contributing Editor Stephen Taub, Staff Writer Rich Blake and Researchers Michele Bickford, Leslie Kramer and Polly Watson.


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