The irresistible rise of hedge funds would seem to be set to continue, despite the pungent whiffs of sulphur that some market observers believe still surround this part of the international financial services industry. A new global survey by PwC and the Alternative Investment Management Association (AIMA) suggests that around half of hedge fund firms intend to launch a new hedge fund by the end of next year and most are reporting rising assets.
Distribution Disrupted – A Spotlight On Alternatives, a survey of fund managers worldwide, assesses the impact of regulatory reforms and changed investor behaviour on hedge fund distribution models and capital-raising efforts.
It found that 61 percent reported rising assets in their hedge funds, while more than 80 percent of firms that have liquid alternatives funds said those products were also growing. No fewer than 44 percent of managers said they would launch a new hedge fund by the end of 2016. In the same period, almost one-third of US managers and 50 percent of UK managers said they would roll out a new liquid alternatives fund.
On the issue of distribution, managers said their own direct sales channel was the most productive source of growth followed by prime brokers’ capital introduction teams, investment consultants and referrals.
The impact of the Alternative Investment Fund Managers Directive (AIFMD) was assessed as varied. Around three-quarters of managers had changed where or how they market non-EU (European Union) funds to EU investors as a result of the directive. Only a small number of EU managers were found to be using the passport, since they continue to manage non-EU funds, but a large proportion of those managers said they would apply for the passport if it became available. A small number of non-EU managers were found to have either set up EU AIFMs or be acting as sub-advisers to EU AIFMs.
The managers surveyed said their investors typically had taken six to 12 months before making an allocation. These investors cited fund performance, manager experience and investment strategy as the three most important factors in making a decision to invest.
Jack Inglis, AIMA CEO, said: “The alternatives industry continues to grow and evolve, a sign that it is responding positively to changed investor demands as well as regulatory reforms. The industry, having begun the process of institutionalisation prior to the global financial crisis, is now maturing rapidly in order to manage a variety of distribution opportunities.”
Olwyn Alexander, PwC EMEA alternatives leader, said: “This survey, the first of its kind, clearly shows how regulation has sparked a growing distribution awareness in the hedge fund industry. There is an ever increasing sophistication amongst investors in how and where they invest and hedge fund managers are clearly thinking strategically about what channels they wish to sell to, where in the world and what mechanisms they use to sell their funds. It is heartening to see the number of managers considering a launch of new products in the coming year, which is testimony to the resilience and strength of the industry.”