As we remarked recently [6], hedge funds, especially those that have rushed into momentum, high-beta, hedge fund hotel names, have had a horrible year, mostly as a result of the double whammy of the most tightly held hedge fund positions getting slammed, compounded by what is unprecedented hedge fund leverage. Indeed, when it comes to hedge fund market exposure there are two numbers one must keep track of: net assets, which are more or less is equivalent to how much inside and outside capital a given entity is managing at a moment in time, and Gross, or regulatory assets, which also includes the impact of leverage and various off the books exposures with one's Prime Broker.
As a reminder, under Dodd Frank, regulators instructed firms to count assets that most were excluding from tallies on size, including holdings obtained through loans, short sales and hedging. Traditionally, hedge-fund advisers have quoted a net number, comprising investor capital plus investment gains and losses, when disclosing their assets under management.
As Bloomberg reported back in 2012 [7], "This is one of the largest changes to the way assets under management are calculated historically,” said Sidney Wigfall, co-managing partner at SC Advisors-Barge Consulting Group, a Chicago-based firm that advises money managers on regulatory compliance. "The SEC wanted to be able to see firms’ asset exposure to both short side trades as well as trades that involve using leverage, regardless of the amount."
Well, now that the April deadline to file annual Form ARDs has passed (one can find the central SEC database for hedge fund records here [8]), we can do an update for not only how big America's largest hedge funds truly are on a gross basis which includes short and repo exposure, as well as the full generosity of their Prime Brokers, but also who are the most levered hedge funds.
The results are shown below. In top place, for many years in a row, remains that HFT and quant wolf in fundamental analyst sheep's clothing, Chicago's very own HFT champion Citadel, followed closely by perpetual SAC pod-PM wannabe, Millennium which is also known for having some curiously profitable HFT pods and has gotten in hot water over its HFT practitioners [9].
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And below is a sort of select brand hedge fund names by Gross, or regulatory, assets:
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How do these compare to historical figures? The chart below uses the gross data provided by Bloomberg as of April 2012 to generate the following two year comparison. The bigest winners in terms of size increase: Bridgewater, Millennium, Citadel and AQR, all of which have regulatory assets well north of $100 billion.
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