United States

Decision time: Do mid-sized hedge funds need to make strategic choices about client targeting?


As mid-sized hedge funds seek new capital, many are looking to institutional clients as a source of growth.

Though institutional mandates have a clear appeal – namely large allocations of capital, the ability to attract other large investors and the resulting management and incentive fees, they are not without some potential drawbacks. The just-released RSM and Greenwich Associates 2010 Hedge Fund Industry Survey Report takes a look at the challenges and demands on high net worth and family office investors as they seek to shift focus to large investors.

Hedge funds that traditionally service high net worth clients may need to make significant investments in sales and service infrastructure to effectively compete for and retain institutional assets. In addition, institutional investors’ expectations for liquidity and fee concessions could have meaningful implications for mid-sized hedge funds.

The survey weighs the accuracy of that perspective by first analyzing the increasingly demanding requirements set by institutional investors in areas such as general due diligence, risk management, overall transparency, client service and liquidity. Next, the survey documents the current level of hedge funds’ capabilities and benchmarks them against those of more traditional investment managers.

“Attracting institutional assets will require new ongoing personnel expenses for the majority of mid-sized hedge funds, as well as significant up-front investments in technology to increase reporting capabilities,” said Alan Alzfan, a partner and national hedge fund practice leader in the Financial Services Group at RSM US LLP.

Download your free copy of the 2010 Hedge Fund Industry Survey Report.