On June 2, the Financial Conduct Authority (FCA) published its bi-annual hedge fund survey (Survey) concerning the investment activities of hedge funds managed by a sample of hedge fund managers operating in the United Kingdom and supervised by the FCA. The FCA has been reporting on similar surveys since October 2009.

The purpose of the Survey is to inform the FCA with respect to its supervisory activity, with the aim of ensuring the efficient operation of markets, the promotion of market integrity and the assessment of systemic risk posed by the investment activities of hedge funds (and in this regard, the FCA is also working closely with the Bank of England’s Financial Policy Committee and the International Organisation of Securities Commissions to gain greater understanding of possible risks posed).

Data reported in the Survey was collected as of September 2014 from 52 hedge fund management firms (Managers) pertaining to the structure and investment activities of 132 hedge funds managed by them during the preceding six-month period (none of which were domiciled in the United Kingdom). To qualify for inclusion in the Survey, any hedge fund managed by a Manager (together with any managed account managed using a consistent strategy) had to demonstrate a net asset value of at least $500 million and be managed (at least in part) from the United Kingdom. As of September 2014, the Managers collectively managed $265 billion of assets from the United Kingdom (and $623 billion globally).

The Survey sets out key trends and risks identified by the FCA, focusing on the size of the global hedge fund industry (based on assets under management (AuM)), the proportion (by AuM) that the hedge fund industry comprises of the alternative investment management industry generally, industry concentrations, investor profiles, fund strategies (including identifying those strategies which had received the highest rate of net subscriptions and those which had suffered the highest net losses) and performance levels. The Survey also reports on derivative transaction data connected to hedge funds, leverage and risk profiles. While there is some overlap between the data collected for the Survey and the new reporting requirements set by the Alternative Investment Fund Managers Directive (AIFMD), based on the finding from the Survey, the FCA is of the view that this overlap is limited (only two of the top 10 funds (by net asset value) provided the same information for the purposes of the Survey and for AIFMD reporting purposes, largely as a consequence of management (for AIFMD purposes) being outside the United Kingdom). As a consequence, the FCA anticipates a continued need going forward to capture information for the largest hedge funds in a smaller, more targeted manner by way of tailored studies such as the Survey.

A copy of the Survey can be found here.