Investment Managers

Knowledge Partnership

Feb
23
2012

2012 SEI Global Hedge Fund Survey

THE SHIFTING HEDGE FUND LANDSCAPE

If 2011 was a tough year for hedge funds, 2012 may be a pivotal one.  The picture that emerges from our latest survey of institutional investors is an industry landscape both rife with challenges and rich with opportunities.  Hedge funds are being tested by institutions' high performance expectations amid a volatile, uncertain global economic climate.  At this point, some reputations are on the line.  Investors are simultaneously demanding more of fund managers in terms of risk management, liquidity, transparency and operational quality.  They are also pushing for the next level of transparency.  Meanwhile, the full effects of 2011's extreme volatility have yet to be felt in redemptions and many funds have not yet climbed back to pre-2008 high water marks.  With stiff competition in a crowded field, some level of shakeout could be just around the corner.  However, those managers who can articulate and execute a differentiated, well-thought-out strategy, with the organisation and depth to execute it well, have a good shot at increasing AUM and market share.

SEI's fifth annual survey of intitutional hedge fund investors, conducted by the SEI Knowledge Partnership in collaboration with Greenwich Associates, is being presented in two parts:

Part I, Institutions Put Fund Managers to the Test explores institutional hedge fund allocations, objectives, performance, and preferences in investment strategies and vehicles.  Highlighted findings include:

  • Long/short equity strategies are currently most in favor.
  • Institutions show limited interest in shifting hedge fund assets to registered products.
  • Investors are strongly concerned with risk management.
  • Absolute return has emerged as the top goal of hedge fund investing.

Part II, The New Dynamics of Hedge Fund Competitveness uncovers investors' chief concerns regarding hedge fund investing.  Among the key findings, we find that:

  • Performance is job #1:  More than 25% of respondents named performance among the greatest challenges of hedge fund investing, double the percentage in 2009.
  • Operational strength has become a major competitive advantage.  Eighty percent of investors say it is the hallmark of an institutional-quality fund.
  • Investors are reaching for the next level of transparency.  While transparency has improved, investors still see it as a top worry.  The top unmet information need is detail on the use of leverage, named by 57% of those surveyed.