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Crystal ball

Hedge fund managers predict more fund launches in 2010

A survey of senior managers at hedge fund firms suggests the industry continues to recover from the global market crisis, as more than 82 per cent of respondents predict that there will be more fund launches this year than in 2009.

The survey of 381 managers by professional services firm Rothstein Kass also found that fewer than 20 per cent of survey participants believe that more funds will close this year than in 2009.

"While nearly 70 per cent of hedge fund professionals we polled still expect 2010 to be a difficult year, there are signs that conditions continue to improve. However, it is clear that the crisis has had a profound impact on the sector and its practices. Stung by fundamental misunderstandings regarding the nature and objectives of hedge fund capital pools, the community has responded by taking steps to offer greater transparency and enhance educational initiatives," says Howard Altman, co-chief executive and co-managing principal of Rothstein Kass.

"Though more than 73 percent of those polled agreed that the pace of redemptions will continue to slow this year, the industry continues to absorb lessons from a period of intense demand for liquidity. For many funds, a wave of redemption requests served as a reminder of the importance of attracting aligned investors with objectives and risk tolerances that are consistent with those of the fund."

The report also found that more than 67 per cent of hedge funds surveyed plan to raise additional investment capital this year.

"Examination of the likely sources of capital points to the continued institutionalization of the hedge fund business, with larger established funds more likely to attract assets from pensions, endowments and benefit plans drawn by the sector's track record of delivering superior, long-term results. High-net worth individuals and families seem to be gravitating toward the family office model when considering allocations to alternative investments, recognising the advantages of pursuing alternative investments as a component of an overarching wealth management strategy," says Altman. "In addition, the slower pace of redemptions has alleviated immediate liquidity concerns and restored fund stability, allowing funds to devote more substantial resources to core portfolio management activities and to evaluating operational best practices."

The research was conducted by Russ Alan Prince, a counsellor on private wealth, and Hannah Shaw Grove, an expert on behaviours and finances of wealthy individuals.

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