Mon, Jan 26, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Infovest21 '40 Act Survey: 53% of managers surveyed have launched or are in the process of launching a '40 Act fund

Monday, July 29, 2013
Opalesque Industry Update - In a first-of-its-kind survey on '40 Act funds, Infovest21's "Hedge Fund Use of '40 Act Registered Investment Funds" survey found that 53% of the surveyed managers have launched a '40 Act mutual fund, are in the process of launching a '40 Act fund or are considering doing so. Another 25% are a subadvisor to a '40 Act fund or considering becoming a subadvisor. 8% have decided not to launch a '40 Act fund.

Lois Peltz, president of Infovest21, said, "The survey also found that over three-quarters of the managers said launching a '40 Act fund was worth the time and effort. The remainder of respondents said it was too early to tell."

Other interesting findings include:

Hedge fund managers'; use of '40 Act funds is more widespread than most expect

While launching a liquid alternative fund is considered by most to be a recent development, almost 30% of the respondents have been managing a '40 Act fund for more than 10 years.

In fact, 42% of those surveyed have more than one '40 Act mutual fund.

Hedge fund performance outperforms liquid alternative performance

As one would expect, the manager's generally reported that their hedge fund performance has been higher than its mutual fund counterpart. On a year-to-date basis (January -June), hedge funds have returned 6.8% compared with 4.1% for the '40 Act fund.

Start-up considerations

For 57% of the respondents, it took 6-12 months to launch a '40 Act fund.

43% of the respondents said the start-up costs ranged between $50,000 and $99,999.

The average estimated breakeven assets under management for the flagship '40 Act fund was $39 million.

Cost is top criteria for selecting a service provider

Cost was the top criteria for managers selecting their service provider while culture/fit came in second at 77% and 69%, respectively.

Asset raising is the biggest challenge

Asset raising is the biggest challenge, as cited by 47% of those surveyed. Lack of investor education and performance were each cited by 35% of those surveyed.

Costs and cannibalization of existing product were the other primary concerns with establishing and managing a mutual fund.

David Sandrew of Atlantic Fund Services, observed: "Private fund managers are seeing the benefits of positioning their firm as asset managers offering different investment vehicles (products/strategies). Despite the perceived difficulties and costs, clearly most managers recognize that enhancing their distribution is worth the effort."

Scott Mackey of McGladrey, added, "Daily liquidity requirements, regulatory restrictions on investment strategies, lower fees and margins, governance requirements (dealing with independent board members, holding regular board meetings), and issuing reports that include quarterly portfolio holding statements and accompanying disclosures all require a different way of thinking for alternative fund managers. Moreover, managers have to learn a whole new way of marketing and distributing products. Investors and advisors will also need to understand these new offerings and how alternative strategies align with their portfolio performance goals."

Over 130 hedge fund managers responded to Infovest21's which was conducted in June. The survey, which was sponsored by McGladrey and Atlantic Fund Services, also explores managers' motivations; how they determined the structure and service providers used; their considerations regarding cost, time and other required resources; challenges and concerns in managing a mutual fund.

Infovest21

Press Release

BM

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. Commodities - Druckenmiller alums at PointState make $1 billion on oil, Andurand Capital sees oil sliding to $40[more]

    Druckenmiller alums at PointState make $1 billion on oil From Bloomberg.com: Hedge fund manager Zach Schreiber stood on stage at Avery Fisher Hall in New York eight months ago and made a bold prediction. “We believe crude oil is going lower -- much lower,” Schreiber, 42, told the audienc

  2. Investing - David Einhorn discloses a new position in Time Warner, Canyon trimming bets on mortgage bonds after making $7bn[more]

    David Einhorn discloses a new position in Time Warner From FTLeavenworthlamp.com: …Einhorn also disclosed a new position in Time Warner. "Since 2009, TWX has refocused its business into a collection of high quality assets including basic cable networks (Turner and CNN), a movie studio (

  3. Top performing private equity firms you should invest in[more]

    Komfie Manalo, Opalesque Asia: Professor Oliver Gottschalg of Paris-based HEC Business School, also known as Ecole des Hautes Etudes Commerciales de Paris has released his annual ranking of the top performing private equity firms. The 2014 HEC-DowJones Private Equity Performance Ranking

  4. Comment - Why invest in hedge funds if they don't outperform the market?[more]

    From Forbes.com: Hedge funds have always been a bit exotic and an enigma to some, but bottom line they are supposed to produce good returns using a range of strategies including global macro, event driven and relative value (arbitrage). And, sophisticated or high-net-worth individuals (HNWIs) could

  5. Owen Li 'truly sorry' for blowing up $100m of hedge fund’s assets[more]

    From CNBC.com: A hedge fund manager told clients he is "truly sorry" for losing virtually all their money. Owen Li, the founder of Canarsie Capital in New York, said Tuesday he had lost all but $200,000 of the firm's capital—down from the roughly $100 million it ran as of late March. "I take r