Monday’s Headlines: The Hedge Fund Industry is Consolidating

The hedge fund industry is consolidating, and funds are getting bigger – even start-ups, according to a Financial Times article entitled “Size Matters in Hedge Funds.” The paper cites a Deutsche Bank report which found that 5 percent of hedge funds managed 90 percent of the industry’s assets, and that start-ups require at least $100 million. The bank predicts this trend will continue:

This has been driven by the increasing institutionalization of the hedge fund industry, according to Anita Nemes, global head of capital introductions at Deutsche. She said institutional investors had risen from 11 percent of survey respondents 10 years ago to 36 percent now. In addition, funds of hedge funds were increasingly reporting their capital was sourced from institutions. Institutional investors demand higher levels of transparency and place more importance on operational infrastructure, said Ms. Nemes, which can be easier to achieve for larger funds. Restrictions on the proportion of a fund that a single allocation can account for also helps larger funds.

However, 17 percent of investors today say they would provide seed capital to a start-up hedge fund, while just 14 percent would have one year ago.

 

Other News:

Wells Fargo plans to increase the size of the bank’s wealth management and insurance divisions through acquisitions. [Financial Times]

HSBC’s 2011 profit rose 27 percent on loan demand in the developing world. [DealBook]

HSBC’s CEO received a $10.5 million bonus. [Financial Times]

Blackstone attracted $10 billion for its latest real estate fund and aims to raise an additional $2 billion by the end of the year. [WSJ]

Wells Fargo will sell its majority stake in Overland Advisors to a new company controlled by the hedge fund’s CEO and CIO. [Businessweek]

Bloomberg will overhaul its data service to make it more intuitive and heighten its rivalry with Thomson Reuters. [Financial Times]

Gerard Satur, who heads macro strategy trading at UBS, said his team of traders is leaving the bank to start Sydney-based MST Capital. [Bloomberg]

Warren Buffet says a successor for his CEO spot at Berkshire Hathaway is in line, but that he's not leaving anytime soon. [WSJ]

A lobbying organization for private equity firms has launched a multimillion-dollar PR campaign to boost the industry’s image. [DealBook]

Regulators closed banks in Minnesota and Georgia, bringing the nationwide tally of bank failures to 11 for the year. [WSJ]

Japanese authorities suspended operations of Tokyo money management firm AIJ after it was unable to account for $2.6 billion in pension funds. [NY Times]

Banco Pichincha, the biggest privately owned bank in Ecuador, has found a niche in Spain among Ecuadorean emigrants. [NY Times]

In Amish country, a respected financier falls from grace. [NY Times]