Investors Cautiously Re-enter Alternative Investments Looking at These Fund Strategies

Two articles by hedge fund observers site renewed interest in hedge funds in general and specifically certain strategies. While emerging market hedge funds have racked up impressive gains thus far this year, other strategies noted by commentators are:  distressed credit, global macro, equity long short and convertible arbitrage.

Though such strategies are cited by managers, a greater need for liquidity has been mentioned in our own original research and through our many events on hedge fund capital raising.  Our own commentators have mentioned their mandates for allocations to managed accounts in some of these strategies.  With the short term focus, other commentators are offering conjecture that there will be a buildup in need for longer term arbitrage strategies and pentup value creation given the under allocations to those longer term strategies.  More information can be found here, http://hedged.biz/tenseconds/2009/06/11/what-do-hedge-fund-investors-want-june-2009/   and  here, http://www.hedgefundlawblog.com/hedge-fund-investors-what-are-investors-looking-for.html

Though liquidity is in demand and changes in terms, well established funds are not budging on fee demands.  Soft terms may be adjusted but in the PE World in contrast, fees are staying the same.  One change in fees is that management fees for more than 35% of funds are more frequently being rolled into the gross carry of the fund.  More information can be found here, http://bit.ly/fWZ8k

Though more established PE firms are holding tight on fees, newer and smaller funds are aiming to raise capital through High Net Worth Individuals (HNWI) .  A survery by Rothstein Kass showed that 75% of new funds were aiming to raise capital from HNWIs and Single Family Offices (SFO).  PE firms are pitching the value of buying into a down market with their newest funds.  The survey was taken of more than 200 emerging PE firms and more than 100 HNWIs and SFOs.  The investor group continued to complain about high fees in particular management fees for large firms and Investment Banking like transaction fees in addition to the carry rate.  You can find more info here, http://www.reuters.com/article/privateEquity/idUSN1044970120090610

McKinsey also sites the trend of increasing headount in hedge funds as cutting at returns.  In successful funds, compensation has increased 1% and in smaller funds, compensation is increasing 6%!  More information can be found here, http://bit.ly/ursF1

Bloomberg also reports that Hedge Fund Investors have gained the upper hand with respect to Hedge Fund GPs.  Yaser Abu Shaban,of Abu Dhabi Commercial Bank PJSC says that with a down year, fees should expect to move downward.  Tony Gannon, chief executive officer of Abbey Capital Ltd., a $1.1 billion hedge fund manager based in Dublin, said he hears a heartbeat in the system for reviving capital coming back into the marketplace.  You can find more info here, http://bit.ly/2ma1nL

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