Across the 62 U.S. hedge funds managing nearly $130 billion in assets under management who participated in the research study, “US Hedge Funds 2009: Fees, Redemptions and Managed Accounts,” 77% told TABB that investors’ three top concerns are operations, safety of strategy, and liquidity risk. According to a press release, the focus on transparency, liquidity, and flexibility are the primary drivers of the managed accounts phenomenon and accordingly, TABB Group estimates that assets in the industry invested through managed accounts will reach $790 billion by 2011, up from $468 billion in 2009.
However, Matt Simon, TABB research analyst and author of the new study , cautions that hedge fund managers said their investors are still attempting to understand the differences between having a managed account versus being in a hedge fund. He says the primary drawback for investors via a managed account revolves around day-to-day activity. “There are cost and administrative benefits to keeping up with portfolio transactions,” he notes in the press release.
Within the hedge fund structure itself, the study finds, hedge funds are striving to protect their business. Focusing specifically on fees, TABB Group expects management and performance fees to decline over the next two years, even though they do appear somewhat stagnant today. While only 15% of study respondents indicated performance fees will decline over the next two years, nearly 25% said management fees will decrease.
Hedge funds told TABB that they are attempting to convey confidence by implementing more liberal lock-up periods. In 2006, the typical lock-up period was approximately 13 months, compared to the current 10 months.
On the issue of hedge fund redemptions, the typical period of advance notice that an investor must provide a fund manager is 30 days. Other hedge funds requiring lengthier notifications told TABB they are re-evaluating these terms, but they expect no changes occurring in the near future.
The 34-page study with 33 exhibits is available for download by TABB Group Equity Research Alliance clients at https://www.tabbgroup.com/Login.aspx . For an executive summary or to purchase the report, visit http://www.tabbgroup.com or email firstname.lastname@example.org .