The Hedge Fund firm of the future

Some of the most senior men and women in the global hedge fund industry have put forward their collective vision of the hedge fund firm of the future in a major new report published today by the Alternative Investment Management Association (AIMA), the global representative of alternative investment managers.

The paper, ‘Perspectives: Industry Leaders on the Future of the Hedge Fund Industry’, is sponsored by Aberdeen Standard Investments (ASI), the global investment company.

It is based on candid and wide-ranging conversations with 25* of the leading figures in the industry, who collectively account for over 300 years of industry leadership and manage in excess of $500bn in hedge fund assets.

The paper finds that hedge fund firms are rapidly transforming their product offerings and how they operate in order to meet the changing needs of investors. These changes include adopting artificial intelligence and other disruptive technologies and partnering with clients on responsible investment mandates.

Larger firms are increasingly becoming fully diversified asset managers with multiple product offerings at varying fee levels. The paper also highlights how many firms are changing themselves internally, with a growing number of managers becoming more data-focused, relying more on teams of highly quantitative talent such as physicists or engineers and less on one or two ‘star’ traders.

The interviewees also discuss, among other themes, fees; succession planning; employee diversity; and “alpha”, “smart beta” and “alternative beta” based client solutions.

AIMA’s CEO, Jack Inglis, said: “This paper shows that the pace of change and innovation in the hedge fund industry is only going to increase. Hedge fund firms are transforming themselves in order to thrive in tomorrow’s market place. Hedge fund firms have always embraced disruption; the leaders with whom we spoke are committed to making the most of the coming changes in the financial world and are enthusiastic about the opportunities to deliver for their clients.”

AIMA’s Global Head of Research, Tom Kehoe, the author of the paper, added: “The hedge fund industry was born of disruption. The leaders with whom we spoke were not only confident in their ability to adapt to the changes that they face, but are at the forefront of this transformation. From the implementation of new investment solutions to the implementation of cutting edge technology to stay ahead of the pack, hedge fund firms are meeting the challenge. In the coming years, hedge fund firms will continue to refine not just what they deliver to their investors, but how they deliver it.”

Aberdeen Standard Investments’ Global Head of Client Driven & Multi-Manager Solutions, Andrew McCaffery, one of the participants in the paper, commented: “The paper demonstrates the growing voice of the client. This is reflected in the range of products and the solutions that are required from, and provided by, hedge funds plus the recognition of the value for money demanded in delivering the solutions. It also shows the fundamentally Darwinian nature of the hedge fund industry whereby the firms which adapt to clients’ needs and grasp technological change will thrive.”

 

To read the paper, click here – scroll down for full paper download.

*Participants comprise –

  • Lee S. Ainslie, Founder, Managing Partner and Chief Executive Officer, Maverick Capital
  • J. Kyle Bass, Founder and Chief Investment Officer, Hayman Capital
  • Dr Leda Braga, Founder, Chief Executive Officer, Systematica Investments
  • Dr Jane Buchan,  Managing Director and Chief Executive Officer, PAAMCO; Co-Chief Executive Officer, PAAMCO Prisma Holdings
  • Dr Ray Carroll, Chief Investment Officer, Neuberger Berman Breton Hill
  • Luke Ellis, Chief Executive Officer, Man Group
  • Seth Fischer, Founder and Chief Investment Officer, Oasis Capital
  • Fiona Frick, Chief Executive Officer, Unigestion
  • David C. Haley, President, HBK Capital Management
  • Dr Campbell Harvey, Professor of Finance, Fuqua School of Business, Duke University; Research Associate, National Bureau of Economic Research; Investment Strategy Advisor, Man Group
  • J. Tomilson Hill, Chairman, Blackstone Alternative Asset Management; Vice Chairman, Blackstone
  • Sir Michael Hintze, Founder, Chief Executive Officer and Senior Investment Officer, CQS
  • Philippe Jordan, President, Capital Fund Management
  • Anthony Kaiser, Founder, Chief Executive Officer and Chief Investment Officer, Kaiser Trading Group
  • Omar Kodmani, Senior Executive Officer, EnTrustPermal
  • Robert S. Koenigsberger, Founder, Chief Investment Officer, and Managing Partner, Gramercy Funds Management
  • Dr Jim Liew, Assistant Professor of Finance, John Hopkins Carey Business School
  • Sir Paul Marshall, Chairman and Chief Investment Officer, Marshall Wace
  • Andrew McCaffery, Global Head of Client-Driven and Multi-Manager Solutions, Aberdeen Standard Investments
  • Dr Robert C. Merton, School of Management Distinguished Professor of Finance, Massachusetts Institute of Technology
  • Dr Lasse H. Pedersen, John A. Paulson Professor of Finance and Alternative Investments, New York University Stern School of Business; Professor of Finance, Copenhagen Business School; Principal, AQR Global Asset Allocation
  • Stuart Roden, Chairman, Lansdowne Partners
  • Paul Sabourin, Chairman, Chief Investment Officer, and Portfolio Manager, Polar Asset Management Partners
  • Kenneth G. Tropin, Founder and Chairman, Graham Capital Management
  • Danny Yong, Chief Investment Officer and Founding Partner, Dymon Asia Capital