Fri, Aug 1, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Rothstein Kass hedge fund manager survey finds growing optimism amid intensifying regulatory and institutional focus

Wednesday, April 20, 2011
Opalesque Industry Update - Fewer than One-Third of Managers Polled Anticipate a Difficult Year for the Sector

Rothstein Kass, a leading professional services firm to the alternative investment community, has published its fifth annual report on hedge fund industry trends. “2011 Hedge Fund Outlook: Brighter Days Ahead?” features the findings of an internet survey of 313 hedge fund managers on their views regarding subjects from capital raising intent to the intensifying regulatory agenda, including the impact of the Volcker Rule on proprietary trading operations at large financial institutions.

The survey was conducted in January 2011, with roughly 70 percent of participants reporting assets under management (AUM) under $500 million, and the balance reporting AUM in excess of $500 million. Key findings include:

• Roughly one-third of hedge fund managers believe 2011 will be a difficult year for the hedge fund industry, a marked improvement from one year ago, when almost 70 percent predicted a rough year ahead

• Nearly 75 percent of survey participants expect that there will be more hedge fund launches in 2011 than in the prior year

• More than 60 percent of managers expect that there will be fewer hedge fund closures in 2011 than in 2010

• 62 percent of survey respondents also agree that as hedge funds add staff, they will benefit from an inflow of talent from other segments of the financial services industry

• Funds launching in 2011 will be more dependent on seed capital than in 2010, according to more than 62 percent of managers polled

“Even at the height of the crisis, our research found that the hedge fund community remained confident in its long-term positioning. Still, in the face of market uncertainty and regulatory challenges, most managers acknowledged the many obstacles ahead. Over the past two years, the sector has again shown its resilience by adapting to meet the evolving needs of its investors. More than 70 percent of hedge fund managers anticipate that institutional investors will be the dominant source of new capital in 2011. While this may not seem surprising today, it is in stark contrast to our 2007 survey results. At that time, only 20 percent of respondents reported that institutional money would come to dominate the industry,” said Howard Altman, Co-CEO of Rothstein Kass and Principal-in-Charge of the firm’s Financial Services Group.

“Those firms that took the lead in developing and implementing institutional-quality operational practices – from succession planning to reporting – are now benefiting from increasing allocations from pension and defined benefits plans seeking to overcome their own funding shortfalls deepened by the crisis.”

“2011 Hedge Fund Outlook: A Brighter Day?” finds the overall trend toward the institutionalization of the hedge fund industry intensifying:

• More than 85 percent of hedge fund managers expect institutional investors to be more averse to high concentrations of illiquid portfolio assets

• General partner investment will be a greater consideration for investors evaluating hedge fund allocations, according to three-quarters of respondents

• Over 80 percent of survey participants expect institutional investors to continue to exhibit a preference for allocations to larger hedge funds

• Nearly 65 percent of managers polled expect that hedge funds will more frequently offer special terms to pension funds and sovereign wealth funds

“The institutionalization of the hedge fund industry is likely to accelerate in coming years. Though regulatory initiatives have played a role, the push for greater communication and transparency is still predominantly a market-driven phenomenon. The fiduciary responsibilities of institutional advisors continue to inspire enhancements to due diligence processes, as investors now more commonly look beyond performance at a range of considerations, including succession planning and operational and reporting practices,” said Mr. Altman.

“Enhancements in these areas have helped to restore investor confidence, and the regulatory focus is likely to persist. When we commissioned our first industry survey in 2007, less than 10 percent of respondents expected significantly more industry regulation. As an ever-increasing portion of “Main Street” has gained access to alternative products through their pension plans, regulatory scrutiny has logically intensified. While these efforts have helped to dispel the notion that the hedge fund industry is unregulated, hedge fund managers have also relied on an enhanced communications focus to dispel other, long-standing misconceptions regarding the sector and its practices.”

The Rothstein Kass “2011 Hedge Fund Outlook” features an insert that highlights notable contrasts across five years of survey data. Among notable findings:

• In 2007, only 20 percent of managers expected institutional money to dominate the hedge fund sector. More than 70 percent of managers believe this to be true today

• More than three-quarters of managers expect to increase AUM in 2011, with nearly 60 percent indicating that they will raise assets by 25 percent or more. In 2010, 67 percent of managers were expecting to raise significant new capital, with only 32 percent expecting to increase assets by 25 percent or more. In 2009, nearly all survey participants expressed a desire to source significant new investment capital

(press release)


Rothstein Kass is a premier professional services firm that has served privately held and publicly traded companies, individuals, and families for more than 50 years. Rothstein Kass is consistently ranked as a top CPA firm to the alternative investment industry in independent, third-party surveys. The Rothstein Kass Financial Services Group provides services to many high-profile and respected clients including hedge funds, fund of funds, private equity and venture capital funds. www.rkco.com


See recent relevant article:
Opalesque Exclusive: Gottex, other hedge fund managers optimistic about business objectives but wary of uncertainties and ready for more consolidation Source

Bg

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
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: Kyria Capital Management bets on women hedge fund managers[more]

    Bailey McCann, Opalesque New York: As hedge fund assets top $3 trillion, and long/short strategies get more crowded than ever, with every manager hunting for even the tiniest bit of alpha, a new firm has emerged that claims its own edge – women. A recent Rothstein Kass study showed women-owned a

  2. Hedge fund manager Winton Capital making headway with long-only strategy[more]

    From PIonline.com: North American investors are helping Winton Capital Management Ltd. make progress — albeit slowly — toward its founder's goal of becoming a $100 billion company. The firm's ticket to quadrupling its assets under management is unlikely to be one of its scientifically designed manag

  3. Opalesque Roundtable: Success in hedge fund marketing not linked to performance, but investor appetite[more]

    Komfie Manalo, Opalesque Asia: Success in marketing a fund is not linked to the performance, but to investor appetite, to the way you can market the fund, and to how much time you can spend to raise assets, said Antoine Rolland, the CEO of incubator and seeding firm

  4. Opalesque Radio: Now is a good time to buy protection cheaply in the options market[more]

    Benedicte Gravrand, Opalesque Geneva: Investors are showing an increased interest in risk parity funds and strategies, Opalesque reported last year. Risk parity strategies have the

  5. The Big Picture: Charlemagne Capital smoothes risk out of frontier market investing with portfolio approach[more]

    Benedicte Gravrand, Opalesque Geneva: Opalesque recently talked to one of the portfolio managers of the Oaks funds, which are emerging and frontier market hedge funds focusing on equity long/short with a directional approach. They are run by