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2013 Business Expense Benchmark Survey
The European “Premium” for Running a Firm
The majority of the industry’s AUM and the majority of our survey participants’ AUM is held by
firms located in the U.S., but in our report this year, we were able to obtain an extremely strong
representation from European firms, thus enabling us to draw some interesting conclusions about
the European industry relative to their U.S. counterparts.
In its H1 2013 report on the location of industry assets,
HFI put total assets managed out of the U.S. at $1.66
trillion out of an industry total of $2.34 trillion (71%).
Our 68 U.S. survey respondents together had $288.0
billion AUM, 17% of the total U.S. population. By
comparison, HFI had assets managed out of Europe
at $414 billion and the 35 participants in our survey
collectively managed $168.5 billion, 41% of the
European total.
One factor that stood out in examining this group of
European participants was that their management
company costs appeared to be higher than the same
charges being realized by U.S. firms. This is illustrated
in Chart 23.
In 4 out of 6 of our size bands, there was a noticeable
premium of at least 20% in terms of expenses being
cited by European survey participants versus U.S.
firms. This was true for hedge funds with $100 million,
$500 million, $5.0 billion and >$10.0 billion AUM.
For those firms with $1.5 and $10.0 billion AUM, the
costs were within +/- 6% of each other—thus much
more in line.
Delving into the numbers, one area stood out more
than any other in terms of explaining the expense
differences between the two regions: This was
regarding expenses attributed to marketing. Unlike
the U.S. where there is one contiguous market across
which hedge funds are looking to raise capital, this is
not the case in Europe. Instead, each country in that
region is able to dictate its own private placement
regime, and marketers must be able to understand
and apply various sets of rules in looking to offer
their product.
Chart 24 shows the variance between European
and U.S. firms in terms of marketing expenses
realized by the management company. This includes
compensation for marketing-related headcount as
well as third-party expenses.
Smaller hedge fund managers in Europe show the
most variance in terms of their marketing spend,
Chart 23: European vs. U.S. Management Company Expenses
(Excluding Investment Management)
Source: Citi Prime Finance. EMEA dataset reflects 35 firms with total AUM of $168.5 billion. U.S. dataset reflects 68 with total AUM of $288 billion
-10%
0%
10%
20%
30%
40%
50%
60%
+20%
+50%
+5%
+21%
-6%
+29%
$100M
$500M
$1.5B
$5B
$10B
>$10B
EUROPEAN COSTS RELATIVE TO U.S. COSTS