New players need strong backers to stay alive

2015 Opalesque Nordic Roundtable (left to right) Matthias Knab, Mikael Stenbom, Stefan Nydahl, David Rindegren, Thomas Stridsman, Renaud Huck, Erik Eidolf, Mikael Spångberg

Delegates at the recent Opalesque Nordic Region Roundtable discussed the plight of new managers, be it regulatory costs, investors who prefer to follow the beaten path or wait for a longer track record, banking or cycles. Some suggested strong backing in order to stay alive.

Irrational investors

The current trend of, on the one hand, assets in the alternative investment industry being close to new highs, and on the other, many funds being closed down is a disturbing one, said Mikael Stenbom, CEO and principal owner of RPM, which manages multi-manager CTA funds. And quite distressing for the alternative investment industry as more assets are being concentrated to fewer players.

"This means that the diversity and the barriers of entry for new managers are becoming higher and more adverse. This lack of diversity means increased risk for the alternative investment industry as a whole. and unfortunately we also see this trend in other industries as well, where the number of significant players is being reduced, such as in the banking industry, the telecom industry, the pharmaceutical industry."

In the alternative investment industry, this is partly driven by regulation, he added, as well as investor behaviour. Many of the larger investors are influenced by political considerations rather than rationality, as they tend to follow their peers rather than their analysis.

Strict Swedish regulations

Erik Eidolf, CEO of Nordkinn Asset Management, which runs a fixed income macro hedge fund, disagreed on the regulation point.......................

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