Hedge Funds Anticipate Weak Economy, Strong Capital Inflows

Apr 24 2008 | 11:26am ET

Despite a negative outlook for the U.S. economy in 2008, hedge fund managers are expecting strong capital inflows, increased fund launches and fewer fund closings for the remainder of the year.

According to a Rothstein Kass survey of 306 senior partners at U.S.-based hedge funds, over 90% of managers expect that significant new money will flow into hedge funds. Almost 75% of managers expect more hedge funds to be launched in 2008 than in 2007, while just over 25% believe that more hedge funds will close this year than last year.

“While the short-term forecast for the hedge fund industry is strong, our research also shows an awareness that challenges persist,” said Howard Altman, co-managing principal of Rothstein Kass. “Staffing issues will rate as an important concern, as nearly 75% of survey participants noted that it will be harder to attract and retain talented individuals.”

Also, managers are split regarding whether more hedge funds will become involved in private equity in 2008 but were unanimous in agreeing that hedge fund fees will not be lowered in 2008.

“Competition for investors is also likely to increase as more funds featuring diverse investment strategies continue to saturate the marketplace,” said Altman. “In this environment, hedge funds will likely become more expensive to operate in 2008, a view that is shared by over 66% of survey respondents.”


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