Survey Finds Hedgies More Optimistic Than In 2010

Apr 20 2011 | 12:51pm ET

Less than one-third of hedge fund managers polled by Rothstein Kass in January expect 2011 to be a difficult year for the industry—a sign that things are looking up, because last January, 70% of managers were pessimistic about the coming 12 months.

The alternative investment service specialist surveyed 313 hedge fund managers for its fifth annual industry report, 2011 Hedge Fund Outlook: Brighter Days Ahead?, seeking their views on everything from capital raising intent to the impact of the Volcker Rule on proprietary trading operations at large financial institutions.

Roughly 70% of participants in the Rothstein Kass survey reported assets under management under $500 million while the balance reported AUM in excess of $500 million.

Nearly 75% of those surveyed expect more hedge fund launches in 2011 than in 2010 while 60% expect fewer closures.

In addition, 62% of managers surveyed believe that hedge funds adding staff will benefit from an inflow of talent from other segments of the financial services industry. The same percentage of respondents felt that funds launched in 2011 would be more dependent on seed capital than were funds last year.

The survey also found widespread belief in the institutionalization of the sector:

“More than 70% of hedge fund managers anticipate that institutional investors will be the dominant source of new capital in 2011,” said Howard Altman, co-CEO of Rothstein Kass. “While this may not seem surprising today, it is in stark contrast to our 2007 survey results. At that time, only 20% of respondents reported that institutional money would come to dominate the industry.”

As for the result of that institutionalization, over 85% of respondents expect institutional investors to be more averse to high concentrations of illiquid portfolio assets and over 80% expect institutions to continue to prefer larger hedge funds.
Over 75% of managers expect to increase their AUM in 2011, with nearly 60% indicating expectations of raising assets by 25% or more.

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