Apparently There’s A ‘Goldilocks’ Hedge Fund Size


I like this.


An eternal optimist, Liu-Yue built two social enterprises to help make the world a better place. Liu-Yue co-founded Oxstones Investment Club a searchable content platform and business tools for knowledge sharing and financial education. also provides investors with direct access to U.S. commercial real estate opportunities and other alternative investments. In addition, Liu-Yue also co-founded Cute Brands a cause-oriented character brand management and brand licensing company that creates social awareness on global issues and societal challenges through character creations. Prior to his entrepreneurial endeavors, Liu-Yue worked as an Executive Associate at M&T Bank in the Structured Real Estate Finance Group where he worked with senior management on multiple bank-wide risk management projects. He also had a dual role as a commercial banker advising UHNWIs and family offices on investments, credit, and banking needs while focused on residential CRE, infrastructure development, and affordable housing projects. Prior to M&T, he held a number of positions in Latin American equities and bonds investment groups at SBC Warburg Dillon Read (Swiss Bank), OFFITBANK (the wealth management division of Wachovia Bank), and in small cap equities at Steinberg Priest Capital Management (family office). Liu-Yue has an MBA specializing in investment management and strategy from Georgetown University and a Bachelor of Science in Finance and Marketing from Stern School of Business at NYU. He also completed graduate studies in international management at the University of Oxford, Trinity College.

By Linette Lopez, Business Insider,

Apparently hedge funds of a certain size are best at getting the market ‘juuuuust right.’


Hedge funds with assets under management of $100-499 million and $500-999 million beat their bigger brethren in terms of 12-month average returns in 2013, says a report by Preqin, a researcher.

The mid-sized firm groups had average 12-month returns of 13.79% and 13.71%, respectively.

Big hedge funds — or as Preqin classifies them, funds with $1-5 billion — posted 12 month average returns of 12.08%.

That doesn’t mean the smaller the better, though. Small hedge funds — those with less than $100 million — did worse than large ones, coming in with average 12 month returns of 11.45%.

“As funds become larger, the distribution of returns among the best performing funds moves towards the
lower end of the return spectrum,” said Amy Bensted, Preqin’s Head of Hedge Fund Products. “The size range $500-999mn had the lowest proportion of funds suffering a loss in 2013, and the longer term return and volatility characteristics of these funds are similar to funds with assets of more than $1bn. Therefore, those investors which are looking to move away from investing in just the largest funds, but without taking on too much volatility, may choose to look towards investing in those funds with more than $500mn in assets.”

That’s the sweet spot.

Business Insider has reported over and over again that the bar to start a hedge fund has been raised over the last decade. It’s hard to go to investors with less than $50 million assets under management and attract sticky money from institutional investors like pension funds.

So when we’re talking about funds with $100 to $499 million AUM, we’re talking about funds that could be relatively new to the game.

And indeed, we’re beginning to see that investors are more willing to go with new hedge funds without the brand name of a big time investor. They see that the smaller funds are cheaper and more nimble in choppy markets than big funds.

That $100-500 million spot is especially attractive these days, according to this Preqin chart:


Prequin hedge fund size chart
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