This article has been republished with permission from Cayman Funds.
Hedge fund professionals are divided on the prospect of future growth in assets. Asked whether hedge fund assets will increase, 54 percent of delegates at GAIM Ops Cayman 2016, which is taking place at the Ritz Carlton on Grand Cayman this week, said they expect the industry to consolidate going forward, while 46 percent thought assets would rise.
The hedge fund investor/manager ‘town hall’ session looked at what’s new and what has changed after 18 months that have been quite challenging for everyone. Investment returns have fallen and barriers to entry have become harder to overcome. Barriers to exits have come down and we have seen the withdrawal of some of the big managers, and more turn into family offices.
Looking at the greatest challenges facing managers today, managing investment risk and operational cost featured strongly in the results of the live audience poll, as well as sourcing attractive investment ideas, meeting investor desire for customised products and the uncertain regulatory environment.
“As a manager I can tell you that we struggle with all five of them every day,” one panellist said.
The audience was also polled on whether the global regulatory response to the Madoff fraud was appropriate or an overreaction. The vast majority of people felt it was about right and there was a need for change. Most recognised it was the right thing to do, but the important issue is how the regulation is practically applied and enforced, the panel concluded, so there must be some balance.
Greater transparency has been a key market development and this has been seen in the form of more customised reporting and more in-depth questionnaires before meetings as investors have become more mature, which had led to a shift in awareness. In addition to transparency, asset allocation has become more sophisticated, the panel said, which has led to more power for investors and the usual pressure on fees.