McGladrey and Greenwich Associates Release Hedge Fund Survey Report
Fourth Quarter 2010
MANUFACTURING INSIGHTS |
Many mid-sized hedge fund managers pursuing institutional investors as a source of investment capital may be underestimating the challenges and costs associated with competing for institutional clients.
2010 McGladrey and Greenwich Associates Hedge Fund Industry Survey Report
Over the past decade, U.S. institutions have become an important source of capital for hedge fund managers. For the largest U.S. hedge funds, institutional investors — led by university endowments and foundations — now rival and even exceed high net worth individuals and family offices as a primary fundraising source. As smaller hedge fund managers look for new sources of growth, many have set their sights on endowments, pension funds and other institutions. In doing so, managers are marketing to clients whose expectations and demands often differ significantly from those in the high net worth segment.
In July 2010, McGladrey teamed with Greenwich Associates in a research study designed to shed light on hedge funds’ capital-raising activities, to provide peer benchmarks on sales and service infrastructure and to identify best practices in reporting and transparency. In short, the study sought to answer a simple question: To what extent are mid-sized hedge fund managers targeting institutional investors and what, if anything, are they doing to prepare for the demands of these clients? In order to answer those questions, Greenwich Associates conducted in-depth interviews with 52 U.S. hedge funds with $100 million-$500 million AUM. Interviews focused on the challenges facing mid-sized hedge funds in the current market and the increasing demands placed on them by investors. Participating hedge funds were asked about changing requirements for liquidity and fees, reporting and client service. Managers were also asked a series of questions on fund demographics and performance, selling and due diligence infrastructure, reporting transparency and tax planning.