Hedge funds are frequently in the financial news, which is not at all surprising given the size of the sector and the public profile and wealth of the founders. So it is good to see that a Hedge Fund Monitor has been released by the Office of Financial Research of the U.S. Department of the Treasury.
In today’s blog, I take a first look at what the data shows.
Background
The Hedge Fund Monitor (HFM) presents charts and data from four existing datasets;
- SEC Form PF,
- CFTC Commitment of Traders Report,
- Federal Reserve Board’s Senior Credit Officer Opinion Survey on Dealer Financing Terms,
- Fixed Income Clearing Corporation Sponsored Repo Volumes.
Details on each of these are provided in the DataSets tab of the Hedge Fund Monitor page.
Charts cover six categories; Size, Leverage, Counterparties, Liquidity, Complexity and Risk Managements.
And as well charts with clear visualisation and download of data, it is great to see an API reference page that provides a public Web API to programmatically access the data.
Let’s take a look at a few selected charts from each category.
Size
There are 32 charts in the HFM Size category, let’s start with one.
- A quarterly time series from Mar 31, 2013 to Mar 31, 2024
- Gross assets of hedge funds categorized by strategy
- Multi-Strategy funds by far the largest at $2.8 trillion of gross assets as of Mar 31, 2024 and up significantly from $1.55 trillion as of Mar 31, 2020
- Equity funds next with $1.8 trillion, Other at $1.66 trillion, Macro $1.1 trillion, Relative value $1 trillion
- Next Credit $570 billion, Event $290 billion, Managed Futures $118 billion, Fund of Funds $63 billion
- Impressive size and growth over the period
There are also separate charts for Net Assets, which is Gross Assets minus liabilities and reflects the equity of investors in hedge funds.
The number of qualifying hedge funds increasing from a count of 1,219 at Mar 31, 2013 to 2,079 in the latest quarter.
Top 10 share at 24.5% in the latest quarter, close to the high of 25.8% in the prior quarter, while the low was 16.7% on Dec 31, 2013. If I had to guess, I would have gone for a higher number like 40%, but I guess that is my bias as large firms tend to dominate the financial press.
Leverage
There are 20 charts in the HFM Leverage category, I will select just one and please note clicking on any of the charts I show in this blog will take you to the actual chart on the HFM page.
Of note is the increased use of Repo, up from $1.1 trillion as of Mar 31, 2022 to $2.1 trillion as of Mar 31, 2024, Prime brokerage remains the largest at $2.3 trillion up from $1.85 trillion as of Mar 31, 2022.
Counterparties
Only 4 charts in the Counterparties section, but some very interesting ones nonetheless.
Hedge funds rely on counterparty relationships for funding needs, securities transactions and derivatives trading. The largest of these are GSIBs (Global Systemically Important Banks), with the chart showing that the top 3 are each above or close to $600 billion (I expect these are US GSIBs) and the next 4 around $300 billion and a couple at $100 billion, some of which will be non-US GSIBs.
Liquidity
The Liquidity category covers Financing, Investor and Portfolio Liquidity with 11 charts.
Showing that in the most recent quarter, 35% of portfolios could be liquidated in 0-1 days (assuming no fire-sale discounting), 24% in 2-7 days, 19% in 8-90 days and 21% in >90 days.
Complexity
The Complexity category covers 3 charts, including one on OTC Derivatives.
Showing that Top 10 HFs use quite a varying percentage share of derivatives volume traded as OTC, a low of 39.3% in the quarter ending Jun 30, 2019 and a high of 64.7% in the quarter ending Jun 30, 2023.
While the Top 51+ HFs use a more static percentage just above 60%, with a high in the most recent quarter of 69.5%.
Risk management
The final category covers risk management with 15 charts, I will select one.
- Covid quarter ending Mar 31, 2020, worst for most strategies, -12% for Event Strategy Funds
- The next quarter ending Jun 30, 2020 the best for most strategies, +17.6% for Equity Strategies
- Equity and Managed Futures look the most volatile swinging between gains and losses
- Mar 31, 2024 the most recent quarter, positive returns for all strategies,
- Relative Value the lowest at 2.9% and Managed Futures the higest at 12.1%
Thats It
Eight charts that provide an insight into Hedge Funds
Interesting insights to say the least.
Charts serving to bring existing datasets to life.
The OFR Hedge Fund Monitor has 85 charts, so there is a lot more to see.
I encourage you to take a look and discover for yourself.
I certainly intend to do so on a regular basis.