Since the market correction of 2008, a vast majority of hedge fund net asset flows have gone to a small minority of hedge funds with the strongest brands. A recent report from Hedge Fund Research shows that approximately 69% of hedge fund assets are controlled by firms with over $5 billion in assets under management and 91% are controlled by firms with over $1 billion in assets. This is a significant increase from the 2009 percentages of 61% and 86% respectively.
Each year many hedge fund investors are inundated with thousands of emails and phone calls from managers requesting a meeting. To filter through the overload of information, investors are turning more and more to a firm’s brand when choosing which funds to meet and ultimately invest with. However, having a strong brand is not limited to just the largest managers.
For example, many investors will allocate to startup firms that spun-out of other high profile organizations, despite the fact they have no audited track record. In reality, a strong brand is even more important for hedge funds with less than $250 million in AUM. Despite the fact that these managers represent a vast majority of the approximately 15,000 hedge funds, they only represent 2.94% of assets.