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Alternative Market Briefing

Peltz study shows hedge fund industry needs ''soul-searching', return to its roots

Thursday, July 14, 2016

Komfie Manalo, Opalesque Asia:

A new white paper by research firm Peltz International has concluded that the current criticism of the hedge fund industry on performance, fees, lack of transparency etc., should lead to industry introspection, regrouping and a possible return to its roots. And while industry consolidation is likely to continue, alignment of interests between investors and managers will increase, it added.

The white paper entitled Re-Evaluating the Hedge Fund Model also concluded that going back to its fundamentals, "hedge funds are not an asset class; hedge fund returns are supposed to be lumpy, not smooth; and hedge funds are not a substitute for all types of investments."

Lois Peltz, author of the report and president of Peltz International, commented, "Institutions that stay in hedge funds will seek lower fees, more transparency and decreased complexity. It is likely that more high profile managers may reduce fees similar to Dan Loeb's new contract with Third Point Re or Larry Robbins' waiving fees for a new fund if investors put in more assets."

The eroding 2/20 model

The challenge facing hedge funds is the public perception that fees are too high, the study said. Even when performing well, many pension plans say they're paying too much for some str......................

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