Mon, Nov 30, 2015
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Infovest21 Consultant Survey says biggest concern about hedge funds is mediocre managers

Tuesday, October 08, 2013
Opalesque Industry Update - "Consultants' Views on Hedge Funds, Funds of Funds and '40 Act Funds" profiles the typical consultant, their investor base, asset allocation and views on hedge funds. Specifically, the survey assesses consultants' views on the role of hedge funds in the portfolio, the percentage allocated to hedge funds, criteria in selecting hedge fund managers, views on fees, major concerns about hedge funds as well as the consulting industry today.

Among the major findings are:

• Over 36% of the consultants view hedge funds very favorably while 23% viewed hedge funds somewhat favorably. Another 18% had somewhat negative views and 23% were neutral.

• The largest percentage of consultants is looking to hedge funds primarily for non-correlated returns (27%). Providing diversification to a traditional portfolio, absolute returns and a more consistent return stream were each cited by 20% of the consultants.

• Of the consultants that provided their specific asset allocation to/recommendation for hedge funds, the average was 36%. The average allocation to/recommendation for funds of funds was 10%.

• Of the strategies asked about, 64% of the consultants highlighted equity long/short as a strategy they currently allocate to/recommend. Meanwhile, 59% cited global macro and 50% pointed to multi-strategy.

• On average, the typical consulting firm has 26 hedge fund managers on its approved list.

• The surveyed consultants said the top criteria in selecting a hedge fund manager is investment approach (23%), followed by performance (18%) and experience (18%).

• Consultants' biggest concern with hedge funds is mediocre managers (18%).

Large versus small consultants

Lois Peltz, president and founder of Infovest21, noted differences exist between small consultants (those with less than $1 billion in assets under advisement) and large consultants (those with more than $1 billion in assets under advisement) when it comes to their experiences with and perceptions of hedge funds. While the sample size is too small to be representative in some cases, the information is useful. Some examples she cited include:

• Most large consultants have a neutral opinion on hedge funds while smaller consultants are more opinionated. One-third of the small consultants view hedge funds very favorably while one-third view them somewhat negatively.

• Large consultants look to hedge funds to fulfill various functions e.g. portfolio diversifier, provider of absolute return and provider of risk return while small consultants emphasize the non correlation feature.

• Large consultants view their experience as their most important characteristic. The small consultants highlighted their research in alternatives as their distinguishing characteristic.

• Whereas pensions comprised 41% of smaller consultants' investors, that segment comprised over one-half of the larger consultants' investor base. High net worth/family offices comprised the second largest investor group for smaller consultants. Endowments were the second largest group for the large consultants.

• Large consultants perceive funds of funds less favorably than the smaller consultants.

• Smaller consultants perceive '40 Act funds less favorably than larger consultants.

• Smaller consultants are more concerned about hedge fund fees than larger consultants. Larger consultants are more concerned about regulation and damaged relationships between investors and managers.

Infovest21 interviewed 25 consultants during the third quarter of 2013. Surveys were conducted by telephone and email.

Press release

Infovest21, founded in 2000, is an information provider to hedge fund investors, managers, funds of funds and service providers. Led by Lois Peltz, president, the firm provides news, research, surveys, white papers as well as organizes seminars and conferences.


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. Other Voices: Hedge fund marketing and the selling cycle[more]

    By Bruce Frumerman. How long is the selling cycle now? That’s a question my financial communications and sales marketing consulting firm has been asked on a regular basis by hedge fund firm owners and sales people, ever since we opened the doors to our firm in 1987 pre-crash. Wa

  2. People - Solus Alternative Asset Management adds chief strategist from BTIG[more]

    From Daniel Greenhaus joined hedge fund manager Solus Alternative Asset Management as managing director and chief strategist. He will work closely with Chris Bondy, Solus’ chief economist, managing director and executive vice president, said Chris Pucillo, CEO and chief investmen

  3. Commodities - Stung by oil, distressed-debt traders see worst losses since '08[more]

    From It’s mid-November, but for investors who trade in the debt of distressed companies, the year’s already done -- and they lost. Hedge funds that specialize in the debt are grappling with their worst declines in seven years. Funds managed by Knighthead Capital Management, Candlewood

  4. Opalesque Roundtable: Seeding deal terms can be onerous for hedge funds[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: Executives from fund of funds firms, family offices, a placement agent, a private equity firm, and an accounting firm gathered in Connecticut last month for the

  5. Opalesque Roundtable: Family offices flock to co-investment[more]

    Bailey McCann, Opalesque New York: Co-investments have been a hot topic for pension funds in recent years, as they try to move away from high fees and improve transparency. But now, family offices are more readily getting into the mix and establishing in-house deal teams, according to the delega