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Alternative Market Briefing

Other voices: Impact of the evolving relationship between investors and managers on fund structuring

Tuesday, June 11, 2019

By: Justin Savage, Ogier

A combination of diminished returns across the hedge fund industry amid challenging market conditions for generating alpha and a continued and increased focus on performance has given rise to a shift away from more traditional hedge fund products to the more attractive returns offered by private equity investments.

As a consequence of this shift, some traditional hedge fund investors moving into the private equity space are bringing (along with their capital) an expectation of receiving offering terms that they would be familiar with from their experience of investing in hedge funds.

In addition to traditional hedge fund investors looking to make the transition to private equity offerings, there are a number of traditional hedge fund managers looking to implement private equity-style offerings, or more hybrid structures, in order to retain or attract capital flows moving in the direction of private equity chasing better returns.

Such private equity or hybrid-style offerings by traditional hedge fund managers often reflect many of the characteristics of a more traditional hedge fund, given the manager's mixed heritage.

The big allocators are getting even bigger and with an increase in size comes an increase in bargaining power and the ability to demand increasingly favourable and bespoke offering terms from managers. Often this increased bargaining power can lead not only to specific rights or benefits within an existing fund st......................

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