In this article, we will take a look at the 15 best cities for hedge fund managers. If you would like to skip our analysis of the hedge fund industry, you can go directly to the 5 Best Cities for Hedge Fund Managers.
According to reports, the US currently dominates the hedge fund industry, with a 65% market share, followed by the UK and Hong Kong. Despite experiencing a decline in recent years, the industry witnessed a record number of new hedge fund launches in 2020 and 2021. However, 2022 recorded the lowest number of launches since 2010, with approximately 900 new funds entering the market. Equity long/short funds were the most common type of new fund launches, followed by crypto and multi-strategy funds.
Amongst the hedge fund categories, equity long/short represents around 27% of all hedge funds. Meanwhile, other equity strategies, such as market neutral and long-biased, along with credit funds, each represent about 15% of the industry. Multi-strategy funds constitute 13% of the overall hedge fund sector. In terms of investment styles, the discretionary approach is the most commonly used method, accounting for 53% of hedge funds. However, a clear trend towards quantification is now evident, with nearly a third of hedge funds adopting a hybrid discretionary and systematic approach. Around 14% of funds apply a fully systematic approach.
After achieving double-digit returns in 2021, the hedge fund industry saw contrasting success in 2022. While the overall industry, as represented by composite hedge fund indices, outperformed both the stock and bond markets, individual hedge funds generally recorded losses. Tiger Global and Third Point are among the major hedge funds that faced losses during 2022. These losses amounted to billions of dollars. Tiger Global’s long/short equity fund lost 56% in value, while the long-only fund dropped by 67% during 2022. The hedge fund lost a total of $18 billion during the entire year. Tiger Global’s top four stock holdings include Meta (NASDAQ:META), Alphabet Inc (NASDAQ:GOOG), Microsoft Corp (NASDAQ:MSFT), and Take-Two Interactive Software (NASDAQ:TTWO).
In 2022, many institutional investors initiated a trend of profit-taking from hedge fund positions. This pattern continued in 2023 and may extend into 2024 as well, possibly limiting some of the growth observed in hedge funds. There's an increased focus on strategies providing diversification and featuring more flexible liquidity terms. Investors are increasingly turning to risk-mitigating strategies to diversify equity risk.
Factors Shaping Hedge Fund City Selection
In terms of regional analysis, North America leads the industry with a 68% market share, followed by Europe at 18% and Asia at 7%. Hence, many US cities feature in the list of best cities for hedge funds. Reports also suggest that France is preparing a new strategy to enhance Paris' appeal as a major finance hub in the European Union. This move comes amidst an initial wave of relocations following Brexit. French President Emmanuel Macron is set to unveil new measures in 2024, although the specific details are yet to be publicly disclosed.
The goal is to build on Paris' success in attracting prominent US banks and hedge funds. Hedge funds tend to choose cities based on various factors, such as regulatory environment, talent availability, infrastructure, proximity to financial centers, and client base. A regulatory environment can include low tax rates, lenient regulatory bodies, and strong legal frameworks. Major cities have large pools of skilled professionals in finance, law, and technology fields.
Furthermore, reliable infrastructure is essential for the efficient operation of firms, and proximity to financial centers facilitates easier access to resources and markets. In addition to this, some cities also have large populations of high-net-worth individuals who are among potential clients for hedge funds. It's these considerations that make cities like New York and London particularly attractive to many hedge funds. You can also check out the Top 20 Financial Cities in the World here.
With this context in mind, let's take a look at the best cities for hedge fund managers.
15 Best Cities for Hedge Fund Managers
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Our Methodology
To shortlist the 15 best cities for hedge fund managers, we consulted numerous sources such as Wall Street Oasis, PitchBook, HedgeThink, and Fortune. These cities have the highest number of hedge funds located in them due to numerous factors, such as a favorable regulatory environment, strong talent pool, and infrastructure. The best cities for hedge fund managers have been ranked in ascending order of the percentage of hedge funds located in each one of them. We used Preqin's annual reports to get information regarding the concentration of hedge funds in the top 10 cities. For the remaining 5 cities, we had to explore other avenues and use slightly dated information due to a lack of more recent data.
By the way, Insider Monkey is an investing website that tracks the movements of corporate insiders and hedge funds. By using a consensus approach, we identify the best stock picks of more than 900 hedge funds investing in US stocks. The top 10 consensus stock picks of hedge funds outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). Whether you are a beginner investor or professional one looking for the best stocks to buy, you can benefit from the wisdom of hedge funds and corporate insiders.
15 Best Cities for Hedge Fund Managers
15. Stamford
Hedge Funds = 0.17%
As per reports, Stamford, Connecticut, is home to about 52 hedge funds. It makes up 0.17% of hedge funds globally and 0.27% of hedge funds in the US. According to Preqin data from April 2016, Connecticut had 79 hedge fund managers. The state is home to some of the largest hedge fund managers in the world, including Bridgewater Associates, AQR Capital Management, Viking Global Investors, and Tudor Investment Corporation.
14. Geneva
Hedge Funds = 0.18%
Geneva makes up almost 0.18% of the world’s hedge funds, with a total of 53 hedge funds. Geneva is a leading global hub for hedge funds, known for its strong financial sector and the presence of several prominent hedge fund firms. Geneva benefits from a favorable regulatory environment, which makes it attractive for hedge fund managers looking for a secure and well-regulated location for their operations.
13. Tokyo
Hedge Funds = 0.23%
Japan has achieved exceptional progress in various areas, including hedge fund management. Tokyo makes up 0.23% of the total hedge funds in the world. There are about 68 hedge funds in Tokyo, as per the last reported data. This number may have significantly increased as of 2024. The increase in economic activity has turned Tokyo into a hot job market for fund managers, with many seeking employment in the wake of the bullish market conditions in the city.
12. Zurich
Hedge Funds = 0.33%
Zurich currently accounts for 0.33% of the world’s hedge funds. It is home to over 100 hedge funds, and this number is likely to have increased since the last report. Investors and professionals looking to establish hedge funds in Zurich would find a supportive environment for innovation and risk-managed investment strategies.
11. Dallas
Hedge Funds = 0.5%
Dallas has around 150 hedge funds, accounting for nearly 0.5% of the total hedge funds in the world. Dallas also accounts for 0.77% of total hedge funds in the United States. The city is a hub for hedge fund activity, with a mix of firms offering specialized investment strategies and services. The job market and the presence of companies like Gauge Capital and Highland Capital Management in the city indicate a competitive environment for hedge fund professionals.
10. Los Angeles
Hedge Funds = 1.6%
LA is among the top 10 cities with the most hedge funds in the world. It makes up for about 1.6% of hedge funds in the world and 2.5% of hedge funds in the US. Hedge funds in Los Angeles, California, are part of a larger and active investment landscape that includes various strategies and a wide range of companies.
9. Toronto
Hedge Funds = 1.6%
Toronto makes up 1.6% of the total hedge funds in the world. The presence of firms like Peregrine Investment Management and Goodwood Funds indicates a strong hedge fund industry in Toronto, with a focus on high-performing strategies and a strong commitment to delivering value to investors. The city is at the ninth position on our list of the best cities for hedge fund managers.
8. Paris
Hedge Funds = 1.6%
Paris has a similar number of hedge funds as Toronto and LA. It is home to many international hedge fund firms that have established European headquarters in the city. These firms have a global reach, investing in a wide array of asset classes and geographies. Paris-based hedge funds employ a variety of investment strategies, including long/short equity, event-driven, macro, and alternative strategies. These strategies are designed to capture alpha in various market conditions.
7. San Francisco
Hedge Funds = 2.4%
San Francisco is home to 2.4% of global hedge funds. It also accounts for 3.7% of the total hedge funds in America. According to Preqin, the typical investors in San Francisco-based hedge funds include foundations, wealth managers, fund of hedge fund managers, endowment plans, family offices, and banks. San Francisco ranks among the top cities for hedge fund assets under management (AUM), indicating its importance in the global hedge fund industry.
6. Greenwich
Hedge Funds = 2.6%
Greenwich constitutes 2.6% of the world’s hedge funds. Greenwich is renowned as the hedge fund capital of the world, with a significant number of hedge funds based there. It makes up about 4% of hedge funds in the US. The area is known for its investment-focused atmosphere and the presence of some of the largest hedge funds by AUM. Companies like Meta (NASDAQ:META), Alphabet Inc (NASDAQ:GOOG), and Microsoft Corp (NASDAQ:MSFT) are among the famous holdings of many hedge funds.
