Hedge Funds Must Adapt or Risk Losing Investors

Hedge funds have been warned that they must alter their investment and operating models if they wish to avoid losing institutional investor confidence. This is according to a survey conducted by SEI.

 

“Based on what we heard from institutional investors and fund managers themselves, it’s time for the industry to make an evolutionary leap.” comments Ross Ellis, VP at SEI. 38% of respondents were unhappy with returns, causing them to renegotiate fees with their fund managers.

 

 

The search for ‘true alpha’is a constant battle for investors as they must weed out those funds that are effectively providing beta dressed up as alpha. Unfortunately, the best way of weeding those funds out is when the market slumps.

 

 

The report also touches on the continued decline of the fund of funds industry, the improvement in transparency since regulators clamped down and the average return of 8% over the past 5 years which the hedge fund industry has produced.

 

 

However, year-to-date returns have been impressive and hedge funds are largely expected to post strong returns by December.