Despite a negative outlook for the US economy in 2008, hedge fund managers expect strong capital inflows, increased fund launches and fewer fund closings over the rest of this year, accord
Despite a negative outlook for the US economy in 2008, hedge fund managers expect strong capital inflows, increased fund launches and fewer fund closings over the rest of this year, according to the latest industry survey conducted by accounting firm Rothstein Kass.
Onward and Upward, a report encompassing the findings of Rothstein Kass’s survey this month of US-based hedge fund firms, was co-authored by Russ Alan Prince, an adviser on private wealth, and Hannah Shaw Grove, an expert on the behaviour and finances of high net worth individuals.
‘Building on the success of our initial survey of hedge fund trends in late 2007, we elected to again poll an extensive sampling of senior managers for their collective thoughts on hot-button issues facing the industry in 2008,’ says Rothstein Kass co-managing principal Howard Altman.
‘While nearly two-thirds of respondents have a generally negative outlook for the US economy, during the balance of 2008, the vast majority of senior hedge fund managers are unfazed by ongoing volatility.
‘More than 90 per cent of industry professionals expect hedge funds to capture even more assets, and just under 75 per cent of respondents suggest that more hedge funds will be launched in 2008 than in the previous year, while only about 25 per cent predict more fund closures.’
The survey was based on telephone interviews with 306 senior partners at US-based hedge fund management groups. Slightly more than half of the firms included in the study had total assets between USD100 and USD750m, with the balance of firms reporting assets under management in excess of USD750m.
Other findings from the survey include the identification of brand image as an important concern, with nearly 90 per cent of respondents indicating that marketing will become much more important to hedge fund success.
Nearly 75 per cent of executive polled indicated that it would be harder to attract and retain talented people. The respondents were split on whether more hedge funds would become involved in private equity this year, but only 1 per cent believed that hedge fund fees would be lowered in 2008.
‘While the short-term forecast for the hedge fund industry is strong, our research also shows an awareness that challenges persist.’ Altman says. ‘Staffing issues rate as an important concern, with nearly 75 per cent of survey participants noting that it will be harder to attract and retain talented individuals.
‘Competition for investors is also likely to increase as more funds featuring diverse investment strategies continue to saturate the marketplace. In this environment, hedge funds are likely to become more expensive to operate in 2008, a view that is shared by more than two-thirds of survey respondents.’
Prince adds: ‘In evaluating the results, we learned that hedge funds are becoming more sophisticated in their marketing approach, likely in response to growing interest from institutional investors. In the latest survey, nearly 90 per cent of respondents recognised that marketing would become much more important to hedge fund success in 2008.’
Rothstein Kass provides audit, tax, accounting and consulting services to hedge funds, funds of funds, private equity funds, broker-dealers and registered investment advisors, advising on a wide range of organisational, operational and regulatory issues through its financial services group.
The firm also advises on fund structuring both inside and outside the US, compliance and financial reporting, as well as tax issues from a federal, state, local and international compliance perspective. Rothstein Kass has offices in New York, New Jersey, California, Colorado, Texas and the Cayman Islands.
