The Next Alternative: Hedge Fund Asset Class Summary

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The Next Alternative: Hedge Fund Asset Class Summary

  1. 1. 11 ALTERNATIVES ALTERNATIVES State Street 2013 Alternative Fund Manager Survey Executive Summary: Hedge Funds September 2013
  2. 2. 22 ALTERNATIVES State Street 2013 Alternative Fund Manager Study • In July 2013, State Street conducted a survey of 391 leading alternative asset managers in collaboration with Preqin, a leading source of data and intelligence for the alternative fund industry. Of these, 186 were from the hedge fund sector. • Managers provided their insights on current challenges, priorities and opportunities across the industry, as well as their predictions for the future. About the Research 63% 27% 8% 2% Hedge Fund Respondents by Region North America Europe Asia Pacific Other
  3. 3. 33 ALTERNATIVES Drivers of Change Hedge fund managers view the change taking place in their industry as being primarily investor-driven. Source: State Street 2013 Alternative Fund Manager Survey 54% 41% 38% 34% 26% 0% 10% 20% 30% 40% 50% 60% Investor demand for greater transparency around risk and performance Increased regulatory scrutiny of alternative funds Investor demand for more favorable fees Investor demand for greater liquidity at fund level Increased manager competition for limited pool of assets Top Five Drivers of Change in the Hedge Fund Sector Note: Respondents could select up to three answers. Only the top five responses are shown.
  4. 4. 44 ALTERNATIVES Evolving Strategies Create Competitive Edge Hedge fund managers are addressing investor needs with new product and fee structures. 35% 27% 22% 12% 10% 22% 30% 7% 14% 15% Offer managed accounts Add new investment strategies with in-house resources Change fee structure Offer UCITS funds Expand into new regions Product and Investment Changes Made by Hedge Fund Managers Since 2008 or Planned by 2018 Introduced this change since 2008 Plan to introduce this change over next five years Source: State Street 2013 Alternative Fund Manager Survey
  5. 5. 55 ALTERNATIVES Operational Excellence With a Spotlight on Risk While many are now providing more information to their investors, most hedge funds do not report having made fundamental changes to their risk and operational strategies post-crisis. 39% 26% 23% 18% 17% 12% 5% 9% 10% 16% Report more information to investors on holdings, risk and performance Use an independent administrator Report more frequently to investors on investment holdings Use new techniques to assess performance & risk relative to peers Purchase or license software to upgrade investment ops technology Risk and Operational Changes Made by Hedge Fund Managers Since 2008 or Planned by 2018 Introduced this change since 2008 Plan to introduce this change over next five years Source: State Street 2013 Alternative Fund Manager Survey
  6. 6. 66 ALTERNATIVES Challenges for the Future Fundraising tops the list of challenges hedge fund managers expect to face going forward. Source: State Street 2013 Alternative Fund Manager Survey 80% 53% 41% 16% 16% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Fundraising Generating performance Adapting to regulation Preserving margins Finding skilled staff Top Five Challenges Predicted by Hedge Fund Managers Over Next Five Years CORP-0853

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