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Top Small-Cap Hedge Funds Surge by 10.5%, Eclipse $32 Billion in Asset Under Management

Date: Tuesday, March 19, 2013
Author: HedgeTracker

The Top 50 Small-Cap focused hedge funds now manage $32.4 billion in U.S. equity assets, allocating 68.7% of their overall assets, or $22.3 billion, to companies with market capitalizations that are less than $2 billion. Notably, during the last quarter the top Small-Cap hedge funds saw their assets under management grow by 10.5%, or $3 billion.

The Top Small-Cap Hedge fund list is led by Elliott Management Corporation, TFS Capital LLC and Deerfield Management Co. Paul Singer’s Elliot Management and James Flynn’s Deerfield Management are both based in New York City, while TFS Capital LLC is headquartered southwest of Philadelphia in West Chester, Pennsylvania.

Elliott Management Corporation was not on last quarter’s Top 50 Small-Cap Hedge Fund List, since to be eligible, a hedge fund must have more than 50% of its equity assets invested in small-cap companies. Last quarter, the firm only allocated 45.8% of its assets to small-cap stocks, but this quarter it increased its small-cap allocation to 53.1%. Elliott’s $1.5B in small-cap holdings was just enough to surpass last quarter’s top small-cap fund, TFS Capital LLC.

TFS Capital, also known as Technical Financial Services, reported $1.43B in small-cap assets, up from $1.36B that it reported at the end of the third quarter. TFS was founded in 1997 by Larry Eiben, Kevin Gates and Richard Gates. All three co-founders are still actively involved in the investment process at the firm, serving as co-portfolio managers. Since its inception, TFS’s investment process has relied on its quantitative models that are designed to exploit market inefficiencies.

Rounding out the top 5 hedge funds on the list are Starboard Value LP and West Face Capital. Deep value-focused Starboard is also based in New York, while event driven West Face Capital is based in Toronto.

Ranking Methodology: The Top 50 Small-Cap Hedge Fund rankings are compiled on a quarterly basis using hedge fund firms’ overall U.S. equity assets under management. The Small-Cap list includes the top hedge funds that have more than 50% of their U.S. equity assets invested in U.S. listed small-cap companies, which have market capitalizations that are less than $2 billion.