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17% of hedge fund managers are currently subadvisors to '40 Act multi-manager funds, survey finds

Thursday, March 20, 2014
Opalesque Industry Update - Infovest21's just-released Eighth Annual Manager Snapshot Survey provides an updated profile of the typical hedge fund manager.

The survey finds that commingled vehicles account for about 47% of the product base while customized mandates and retail products account for 37% and 11% respectively.

Only 7% of the respondents offer '40 Act mutual funds however 17% are subadvisors to a '40 Act mutual fund of funds.

Lois Peltz, president of Infovest21 and author of the report, said, "Of those not subadvising, over 60% do not plan to move in that direction in the next year. However, 27% do plan to move in that direction while another 12% are considering it. “

Of those not offering a '40 Act mutual fund, 12% said their strategy is not suitable while 8% highlighted the cost as the main reason for not taking this approach. Another 8% cited the lack of incentive fee as the primary stumbling block. Other reasons included being too small, generally not liking retail funds, daily liquidity issues or their focus being on commingled products.

Investor mix

The typical hedge fund organization's investor base includes 24% high net worth/family offices, 12% pension funds, and 11% each to financial institutions, funds of funds and foundations.

Looking out a year, managers expect high net worth/family offices, pensions and insurance companies' percentage of the investor mix to remain about the same while funds of funds' and corporations' percentages are expected to increase. The percentage for foundations and other financial institutions is expected to fall.

Large managers (those with over $1 billion in assets) had a higher percentage of pensions, endowments and foundations than smaller and medium sized managers. Medium-sized managers ($500 million to $999.9 million) had a relatively higher percentage of financial institutions while smaller managers (those with assets below $500 million) tend to have a higher percentage of family offices, funds of funds and corporate investors.

The average fee structure is a 1.5% management fee and a 16.6% performance fee.

The most-cited challenge for 2014, as cited by 48% of the managers, is growing assets.

Other details in the report include:

Topics Covered:

*Assets under management
*Length of track record
*Differentiating characteristics
*Infrastructure
*Location
*Investor base
*Most used strategies
*Portfolio composition
*Performance
*Product mix
*Terms
*Strategic changes
Historical comparison
Impact of asset size on responses

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. The firm's focus is on hedge funds, funds of funds and '40 Act funds.

infovest21.com

Recent related coverage:
10.03.2014 White paper finds endowments' allocation to hedge funds relatively stable but role has changed

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