Thursday, 21 August 2014
Last updated 2 hours ago
Nov 26 2008 | 12:18pm ET
Worsening market conditions and changes to the regulatory landscape will force many hedge funds to close or sell out, according to global consulting firm Watson Wyatt.
In a note to its clients, Watson Wyatt said the current crisis will expose hedge funds that are “not structured to add value for investors” and “will provide the most skilled with attractive opportunities and potential for substantial returns in the future.”
However, it added that once the smoke clears, surviving hedge fund managers will be better placed to exploit investment opportunities generated by the market dislocations and lower prices, made easier by banks' extinct proprietary trading desks.
In the long haul, end investors such as pension funds will emerge as beneficiaries of industry changes through improved fee structures. According to the firm, there are early signs pointing to hedge funds becoming more flexible in the negotiation of fees.
“While we strongly believe skilled managers should be fairly compensated, fees are generally still too high for the value they deliver, particularly as we enter a lower-return environment,” said Craig Baker, global head of manager research at Watson Wyatt.
“Also, performance fees introduced to align interests have been less than effective because they are generally poorly designed and tipped in managers' favor. For a number of years we have been trying to rectify this situation and negotiate a fairer deal on fees, but only now we are seeing real progress.”
Aug 4 2014 | 7:42am ET
By now, U.S. and international subscribers have received their home or office delivery of the special 500th issue of Futures magazine. You can too!—a very special offer follows. The issue is the largest in years—filled with the best trading strategies and stories from 43 years of being the primary publication for commodity, stock, options and forex traders. Read more…
The July/August 2014 issue is our largest in years—filled with the best trading strategies and stories from 43 years of being the primary publication for commodity, stock, options and forex traders.
The Alpha Pages Editor's Note