There is a new environment. Yet this round of growth will be different from those in the past. Institutional investors will eclipse high net worth individuals as the primary source of investment. Traditional fee arrangements will erode in the face of more customized models. And new markets will emerge both as investment destinations and as potential customers.
The majority of hedge fund managers believe that pension funds will be their primary source of capital by 2020. Public pension funds and sovereign wealth funds together will account for at least a quarter of capital inflows into hedge funds by 2020.
Product diversification strategies are anticipated to attract new investors. Two thirds of managers think their client demographics will be less concentrated in the next five years.
Forty-six percent of respondents expect to either alter their fund strategy or launch new products to attract institutional investors in the next 5 years.
Forty-three percent of respondents said they expect to change the markets in which they invest their capital, while 21 percent of respondents said they would invest in the emerging markets and 7 percent in the frontier markets.
Forty-seven percent of all fund managers reported that they already offer a fund of one or managed account solution.
Thirty-eight percent of respondents said that they either had, or were developing, a UCITS fund and 27 percent said the same about 40-Act funds.
Three-quarters of respondents said that they expect the number of hedge fund managers to either decrease or stay the same over the next five years.
More than three-quarters cited increased regulation as the biggest threat to the industry overall.
Eighty-four percent said that their operating costs had increased as a result of compliance obligations.
This report incorporates the views of more than 100 hedge fund managers representing approximately USD440 billion of assets under management (AUM). Online survey respondents included hedge funds of all sizes, with 43 percent of respondents managing less than USD500 million, 16 percent managing between USD500 million and USD999 million, and 30 percent managing greater than USD1 billion in assets under management. Eighty-four percent of respondents identified themselves as single fund managers and 16 percent as ‘fund of fund’ managers.
The geographic dispersion of our respondents broadly reflects the overall market with more than a third of respondents identifying North America as their headquarters and around a quarter citing the UK. Around a fifth of our respondents reported being headquartered in either (non-UK) Europe or Asia-Pacific.
This report also benefited from a series of structured one-on-one interviews with leading hedge fund managers in major centers around the world who provided deeper insight into the opportunities and strategies they were undertaking to drive growth in this new environment.