Consensus amongst hedge fund managers may lead to investment shocks in 2015

Date: Thursday, January 8, 2015
Author: HedgeWeek

The world's hedge fund have a benign attitude towards 2015 market conditions and the investment outlook for the year ahead despite a deterioration in observed financing conditions and tightening of liquidity. 

That’s according to a survey by Aksia which also reveals that AIFMD legislation is imposing considerable difficulties on managers of all sizes, with smaller managers particularly impacted and the majority of managers becoming entirely reliant on reverse solicitation.
 
In the fourth annual institutional hedge fund manager survey, Aksia polled 187 managers collectively representing in excess of USD1 trillion in AUM.
  
Managers say that liquidity and financing are becoming more challenging, with the percentage of managers reporting a deterioration in financing conditions doubling to 17% versus last year's survey (8%), and more than 3x the number of the 2013 survey (5.5%).  A third of respondents (33%) said that liquidity conditions in their markets have worsened since last year.

87% of managers say new AIFMD requirements are creating significant challenges for their firms, with a majority (59%) reporting that they are fully reliant on reverse solicitation in European countries. 

Managers stating that high-frequency trading has zero impact on their strategy's performance increased from 62% to 82%.  Given the uproar about HFT in 2014, this finding was surprising.  Those believing HFT has a negative impact dropped from 27% in the 2013 survey to only 11% in 2015. 

Despite the headlines around the growth of liquid alternatives, the survey finds no change in the number of hedge fund managers offering UCITS or ‘40 Act products.

Janet Yellen tops Santa’s 'Naughty or Nice’ list with 68% of respondents voting to give her an iPhone 6 in her Christmas stocking while the US Congress receive a stocking full of coal (95% negative), even more than President Putin (93% negative).

“This year’s survey shows a surprising degree of consensus views across the industry with regards to markets, business choices, and policy makers.  Perhaps this foreshadows a boring 2015, or it could foreshadow the potential for large shocks in 2015 from inevitable market surprises," says Jim Vos, CEO of Aksia.