Bridgewater Associates reportedly remains the largest hedge fund in the world ”“ but only just barely, under a new reporting requirement under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Large hedge funds ”“ those with at least $150 million in assets under management ”“ are now required to report “regulatory assets under management” (RAUM) in their portfolios, including assets that were acquired with borrowed money. The change comes even as hedge funds had their best first quarter since 2006, according to an index maintained by Illinois-based Hedge Fund Research Inc., with the sector gaining 4.9 percent led by equity-based hedge funds.
And the change comes in the first year in at least a half decade that the Connecticut General Assembly has not attempted to push through new laws governing hedge funds. Also at the same time, the new Jumpstart Our Business Startups (JOBS) Act loosens restrictions governing how hedge funds can solicit funds, including through the use of advertising.
According to a Bloomberg study of changes wrought under Dodd-Frank”™s new rules, assets spiked at Chicago-based Citadel Advisors L.L.C. to $119 billion, up ninefold and just short of the $121 billion at Westport-based Bridgewater Associates, whose asset base did not change under the new formula.
At some 50 of the largest hedge funds in the country, overall assets under management jumped by nearly two-thirds to more than $1.3 trillion. The new rules also juggled the hierarchy of top funds, as ranked by assets under management, with several in Fairfield County moving up the list.
RAUM pushed Greenwich-based AQR Capital Management L.L.C. to the fourth largest hedge fund with $75.6 billion, Bloomberg reported, up from the net assets of $43.5 billion it held at the close of 2011 under the old rules.
Stamford-based SAC Capital Advisors L.L.C. also cracked the top 10, with a new asset total of $43.8 billion, more than triple the figure it had on file under the old rules last November, according to Bloomberg.
In ballooning their assets under the new rules, hedge funds ironically may have made it more difficult to raise money for future funds. The Washington, D.C.-based Managed Funds Association said the new rules make funds appear “bigger” than they really are and will have different regulators looking at different sets of figures to include the Commodities Futures Trading Commission. MFA maintains RAUM is not an accurate indicator of investor capital at risk, leverage, or the riskiness of any one particular fund, manager, or the industry at large.
Daniel Celeghin, a partner at the Darien asset manager advisory firm Casey Quirk & Associates L.L.C., told Bloomberg that some hedge funds are concerned the new rules might scare off some of their limited partners (LP) due to the difference in assets under management.
LPs showed renewed enthusiasm for startup hedge funds last year, with the 1,000-plus new funds the most launched since 2007, according to Hedge Fund Research Inc.
