Industry Updates

Infovest survey: Hedge fund managers' biggest concern is bias toward larger managers despite performance results

Thursday, April 22, 2010

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Opalesque Industry Update - During April, Infovest21 interviewed 60 managers about their strategies, track record, infrastructure, asset base, investor base, portfolio composition, terms, returns and outlook.

The survey, the sixth annual Infovest21 manager snapshot survey, provides a snapshot look at the typical hedge fund manager in today's environment. Among the most interesting findings are:

• Managers' biggest concern is bias toward larger managers despite performance. Regulation had been considered the biggest challenge in recent prior annual surveys.

• Highest performance in 2009 came from the smallest managers i.e. those with less than $100 million under management. On average, they generated a 44% return. The average performance for all managers surveyed was 36% in 2009.

• The same percentage of managers, 79%, is registered today as in 2008.

• The main reason managers think their investors allocate to them is their investment approach/strategy. In prior years, the main reason had been performance.

• The average breakdown of the investor base is: 41% high net worth/family office, 18% funds of funds, 14% pensions, 12% other financial intermediaries, 4% foundations, 4% endowments, 3% sovereign wealth funds and 4% other.

Looking ahead to next year, the managers expect to see a decline in the percentage of high net worth investors/family offices with increases in foundations, pensions and endowments.

• Most managers have made changes to their business strategy. Most frequently mentioned was offering more products and services. Also mentioned were becoming more marketing oriented, expanding into new markets and cultivating institutional clients.

• The average assets per hedge fund firm in the survey dropped from $3.2 billion in 2008 to $2.7 billion today.

• A big drop occurred in the number of people in the typical organization from 78 in 2008 to 35 today.

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