Infovest21: 17% Of HF Managers Sub-Advise '40 Act Funds

Mar 19 2014 | 10:43am ET

A significant number of hedge fund managers now serve or are considering serving as sub-advisors to '40 Act mutual funds, according to new research from Infovest21.

While only 7% of the hedge fund managers polled offer mutual funds, 17% act as sub-advisors to '40 Act mutual funds of funds.

"Of those not sub-advising, over 60% do not plan to move in that direction in the next year,” said Lois Peltz, president of Infovest21. “However, 27% do plan to move in that direction while another 12% are considering it.”

Of those not offering a '40 Act mutual fund, 12% said their strategy is not suitable while 8% highlighted the cost as the main reason for not taking this approach. Another 8% cited the lack of incentive fee as the primary stumbling block. Other reasons included being too small, generally not liking retail funds, daily liquidity issues or their focus being on commingled products.

The survey finds that commingled vehicles account for about 47% of the managers' product base while customized mandates and retail products account for 37% and 11% respectively.

High-net-worth individuals and family offices account for 24% of the average hedge fund's investor base; pension funds for 12%; and financial institutions, funds of funds and foundations for 11% each.

Managers expect high net worth/family offices, pensions and insurance companies' percentage of the investor mix to remain about the same while funds of funds' and corporations' percentages are expected to increase. The percentage for foundations and other financial institutions is expected to fall.

Large managers (those with over $1 billion in assets) had a higher percentage of pensions, endowments and foundations than did smaller and medium-sized managers. Medium-sized managers ($500 million to $999.9 million) had a relatively higher percentage of financial institutions while smaller managers (those with assets below $500 million) tend to have a higher percentage of family offices, funds of funds and corporate investors.

The average fee structure is a 1.5% management fee and a 16.6% performance fee.

The biggest challenge for 2014, as cited by 48% of the managers, is growing assets.


In Depth

Part II: Roubini Talks Risk, Recovery And The Threat Of A Triple Dip Recession

Oct 21 2014 | 12:41pm ET

In the second half of our interview with Nouriel Roubini, FINalternatives editor...

Lifestyle

Balyasny Pays Over $6M For Lakefront House

Oct 22 2014 | 10:29am ET

A venture headed by hedge fund manager Dmitry Balyasny just paid $6.2 million for...

Guest Contributor

Hedge Funds Weather A Data Management Perfect Storm

Oct 22 2014 | 12:28pm ET

From a regulatory standpoint, nearly every development since the crisis has placed...

 

Videos

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

October 2014 Cover

Deeply flawed risk benchmark

Most traders agree that proper risk management is the key to successful trading. However, many traders depend on the deeply flawed measure of standard deviation as a benchmark of risk. Here we put it ...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.