Thu, Apr 17, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Emerging hedge fund managers struggle to cover expenses with management fees

Monday, December 09, 2013

Precy Dumlao, Opalesque Asia for New Managers:

Emerging hedge funds struggle to cover operational expenses solely on their management fee alone and do not realize comfortable operating margins at any point below $1bn in assets under management, that was the finding of the second annual Hedge Fund Business Expense Benchmark Survey by Citi Prime Finance’s Global Business Advisory team.

The survey also found that institutional hedge funds begin to realize better operating margins as they surpass $1.5bn and move beyond the $5bn AUM threshold. At the same time, the average management fee continues to be well below the historical 2.0% level, on average management fees for franchise firms are 1.53%, the survey said.

"Based on this analysis and our survey responses, we estimate that hedge fund managers need at least $300m AUM to break even. Firms with lower amounts of AUM will not be able to cover their management company costs without additional capital or incentive fee payouts. These management company costs include third party expenses, salaries for the investment team and total compensation for investment support and business management personnel," Citi Prime said in the survey.

Citi found that emerging fund managers with $500m in AUM, realize operating margins of only 69 basis points ($3.4m). At $900m AUM, operating margins incre......................

To view our full article Click here

Banner
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing
  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Opalesque Exclusive: European stock-picking fund up 19% YTD, bets on small caps’ high cash level[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: Here is a European long/short equity fund that has been beating the odds since its 2008 inception by employing its own investment model, frequent company visits

  2. CTAs could face new challenges in a rising rates environment[more]

    Bailey McCann, Opalesque New York: CTAs have taken a beating performance wise lately, and asset flows reports show that investors aren't sticking around to see how the movie ends. Now, a new white paper from Roy Niederhoffer and Coen Weddepohl notes that as interest rates start to tick back u

  3. Investing – Big hedge funds bought Puerto Rico's junk bonds, Fidelity explores new trading venue amid flash trade concerns, Crisis-era Greek bonds reward early buyers with big effective returns, Cargill unit discloses stake in Freddie preferred[more]

    Big hedge funds bought Puerto Rico's junk bonds From Reuters.com: Several large hedge funds doubled down on Puerto Rico in last month's giant bond sale despite the U.S. territory's financial struggles, the Wall Street Journal reported, citing confidential documents reviewed by the newspa

  4. Opalesque TV: First Trust Advisors launches liquid alternatives platform[more]

    Bailey McCann, Opalesque New York: First Trust Advisors is launching a new liquid alternatives platform aimed at building on the companies existing alternative ETFs offering by adding hedged mutual funds. Senior Portfolio Managers Rob Guttschow and John Gambla recently sat down in an

  5. Commodities – Popular value fund manager David Iben bets on Russia, gold,[more]

    From Reuters.com: With large bets on Russia and North American gold miners, one of the best performing stock pickers in the wake of the 2008 financial crisis is back with a new fund that reflects his deep aversion to following the crowd. In the Kopernik Global All-Cap Fund, David Iben is follo