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Arthur Tully Bailey McCann, Opalesque New York:

Despite a spate of new regulations aimed at protecting hedge fund investors, a mere 10% of them feel that the new regulations will actually protect their interests according a recent survey completed by Ernst & Young. The 2012 survey, Finding Common Ground, was compiled by consulting firm Greenwich Associates for Ernst & Young, and compares opinions from 100 hedge fund managers who manage over US$710bn and 50 institutional investors with over US$190bn allocated to hedge funds on current topics related to the hedge fund industry. Findings show that although the two groups agree on increasing investments in headcount, technology and risk management, stark contrasts exist on compensation structure, fees and expenses.

At a broad level, the investors in the survey plan to maintain their allocations to hedge funds, but in a surprising shift, much of that investment is being moved away from the biggest hedge funds and into smaller, emerging managers. Fund of funds are also following this trend, with a majority of fund of funds respondents saying that they are investing in a "fund of one."

Managers generally seem to support this trend. 90% of managers in the survey expressed a preference for direct investments from institutional investors over fund of funds and nearly two-thirds of pension funds and endowments responded that they prefer direct investment in hedge funds.

Survey authors note that while no direct caus......................

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