Tue, Aug 22, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
New Managers July 2017

PERSPECTIVES: Most smaller hedge fund firms can turn profit with less than $100m in AuM

Most alternative investment management firms are able to turn a profit and expand with considerably less than $100m in assets, according to a survey of sub-$500m firms by the Alternative Investment Management Association (AIMA), the global representative of alternative asset managers, and GPP, the boutique prime broker.

The joint AIMA/GPP survey of 135 alternative asset managers globally found that the average break-even point is around $86m, while around a third are able to break even with $50m in assets or less. Break-even was found to be highest among global macro hedge fund firms that responded to the survey ($132m on average) and smallest for alternative credit fund managers ($77m).

The research shed new light on the impact of broader trends and themes on this segment of the industry, such as fee pressures, the impact of post-crisis regulations, demands for ever greater methods of alignment of interests, and the optimum mix between having dedicated in-house staff and out-sourcing.

In terms of management fees, about half said they are charging 1.5% or less. For hedge fund start-up businesses, management fees were found to be around 1.25% on average. In terms of performance fees, about two-thirds of smaller managers said they are charging less than 20%. About three quarters (77%) expect performance fees to remain unchanged over the next year while 11% expect a decrease and 12% expect an increase.

Methods of aligning interests between smaller managers and fund investors were found to be growing. Close to 90% of funds said they have a high watermark - a peak value above which performance fees can be charged. Roughly one-in-three have hurdle rates - a further trigger for performance fees agreed between the manager and investor. And while less common, 8% of smaller managers said their flagship fund provides fee clawbacks to investors under certain conditions.

More than 80% of respondents said they planned to increase their headcount in the nex......................

To view our full article please login

This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.
New Managers
New Managers
New Managers

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. Opalesque Exclusive: Albright Capital puts a value lens on emerging markets[more]

    Bailey McCann, Opalesque New York: Over the past decade, investors have steadily increased investments in emerging markets private funds. Allocations to the cohort have increased from $93 billion in December 2006 to $564 billion in September 2016, according to data from research firm Preqin. Howe

  2. Comment: "Long-Term Investing": What managing drawdown risk can do to your long-term returns[more]

    Matthias Knab, Opalesque: Real Investment Advice writes on Harvest Exchange: Last week, I was having lunch with a prospective portfolio management client discussing the curre

  3. Jasper Capital International joins Hedge Fund Standards Board[more]

    Komfie Manalo, Opalesque Asia: Diversified and systematic investment firm Jasper Capital International has become the second China-based signatory to the Hedge Fund Standards Board (HFSB), an organization that brings hedge fund managers and investors together to set standards for the hedge fund i

  4. Investing - Hedge-fund honchos including David Tepper are loading up on Alibaba, Billionaire hedge fund manager Stanley Druckenmiller is betting big on the Chinese consumer, Big-name U.S. hedge funds shed healthcare stocks during the rally in second-quarter, U.S. hedge funds bearish on FAANG stocks in second-quarter, Hedge fund titan Viking Global made a $680 million bet on scandal-plagued Wells Fargo[more]

    Hedge-fund honchos including David Tepper are loading up on Alibaba From CNBC.com: David Tepper's Appaloosa Management and three other he ge funds took new stakes in Chinese e-commerce giant Alibaba in the second quarter, according to the latest quarterly filings. Appaloosa disclos

  5. FinTech - Danger: Crowdfunding on the wrong platform could force you to go public[more]

    From LinkedIn.com: Some equity crowdfunding platforms are putting startups at serious risk. Working with a platform that doesn't structure your deal appropriately could jeopardize your ability to raise future capital or worse, force you to become a public reporting company. The emergence of eq