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Credit Suisse's annual hedge fund manager survey reveals they expect industry to grow to $2tln by year-end, almost half arealdy manage managed-accounts

Friday, February 26, 2010
Opalesque Industry Update - Credit Suisse announced the results of its annual Hedge Fund Manager Survey, which provides insight into leading hedge fund managers’ views on the issues that are most critical to investors - fees, liquidity, transparency, due diligence, managed accounts and UCITS funds.

The survey, which was compiled by Credit Suisse’s Prime Services group reflect responses from hedge fund manager groups, representing in excess of USD $475bn of hedge fund assets under management, with 48% by number in the US, 34% from Europe and 18% from Asia.

“While this high response partly reflects the growth of Credit Suisse’s Prime Services business, it also shows how seriously our hedge fund manager clients are treating investor concerns”, said Edgar Senior, Managing Director and Head of Capital Services at Credit Suisse in London. “Our survey provides an intriguing snapshot into the views and experiences of a diverse population of the industry’s leading managers as they seek to build and diversify their asset bases.”

On one of the more topical elements – the economics of the hedge fund industry – less than one-tenth of managers expected average fees to decrease across the board in the foreseeable future, but almost two-thirds believed it likely that fee reductions will be offered to investors prepared to commit their capital for longer periods. Managers’ views on inflows suggested that the global asset size of the hedge fund industry would increase from an average estimate of $1.73 trillion at the end of 2009 to $1.99 trillion by the end of 2010, showing moderate optimism about inflows from investors seeking non-correlated absolute returns to protect themselves from unpredictable markets.

Following from the stresses that impacted the hedge fund industry in 2008, it was in line with expectations that managers reported that investors’ due diligence has increased significantly since then, with the average length having increased from 5.8 months to 7.5 months, an increase of 30%. In particular, managers observed that the proportion of funds of hedge funds typically completing their due diligence within three months had plummeted from 41% to only 9%.

An unexpectedly high 47% of this year’s respondents already manage one or more managed accounts and a further 39% either intend or are closely investigating how to do so, leaving only 14% who find no role for managed accounts in their marketing plans. The survey also shows increased interest, albeit less activity, in the issuance of “UCITS hedge funds”, or the sale of absolute return strategies via European regulated fund structures. While only 9% of global managers currently offered a UCITS product, a further 41% are either intending to launch one or are investigating how to do so, with over 70% of European managers either managing a UCITS hedge fund or looking closely into it.

Senior commented “We see both managed accounts and UCITS hedge funds as potent tools for investors seeking enhanced corporate governance, transparency and liquidity – albeit they are not suitable for certain strategies - and we are delighted that these results confirm that supply is rising to meet this demand, easing the negative selection fears of previous years.”

At the end of March, Credit Suisse will release a second survey into the hedge fund industry, aggregating the views and activity of the investor community, which will highlight areas of agreement – and potential disagreement – between investors and managers.

The detailed results of the survey will be shared with existing Prime Services clients, both managers and investors, but prospective clients may also contact Credit Suisse to obtain a copy. Amy Cayzer, Tel. +44 207 888 6744, amy.cayzer@credit-suisse.com


As one of the world's leading banks, Credit Suisse provides its clients with private banking, investment banking and asset management services worldwide. Credit Suisse is active in over 50 countries and employs approximately 47,600 people. www.credit-suisse.com.


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