Ever wonder what the Securities and Exchange Commission does with Form PF data? The SEC’s Division of Economic and Risk Analysis just published a paper analyzing beneficial ownership concentration and fund outcomes: Beneficial Ownership Concentration and Fund Outcomes for Qualifying Hedge Funds.
Specifically, DERA looked at Form PF question 15 that asks what percentage of the fund is owned by the five largest investors. The paper deems any fund where that percentage is greater than 70% to be “concentrated.” In 2023, there were 2108 “Qualifying Hedge Funds” which is defined as funds with more than $500 million in NAV. Roughly half fall in the category of concentrated.
The math is a bit too detailed for lawyer like me to completely decipher. (My worst class in college was stats.) It looks like non-concentrated hedge funds have a slightly better performance than concentrated hedge funds. Net returns of 6.5% versus 6.4% shown on Table 7C.
Sources:
- Beneficial Ownership Concentration and Fund Outcomes for Qualifying Hedge Funds by Ulas Alkan, Ross Askanazi, Dominique Brabant, Su Li, and Joseph R. Simmons