> Professional Traders:
Leading Change in the Hedge Fund Industry
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y 2018, the core hedge fund industry assets under management (AuM) are forecasted to balloon to $4.81 trillion – an increase of 81% from the $2.63 trillion registered at the end of 2013.
For every seven funds launched in 2002, one fund was settled. Since then, the number of hedge funds being liquidated has grown dramatically. In 2013, for every fund launched, another one was liquidated. This means that the number of funds being formed is almost equal to the number of funds being closed down. According to recent research conducted by 154
KPMG, one of the main reasons for the continued slowdown in the hedge fund industry expected to occur over the next five years is the loss of assets due to underperformance. Amongst the hedge funds surveyed, 84% of participants agreed that customised fee structures will become more prevalent as opposed to the standard 2/20 rule. In 2014, Credit Suisse conducted a global survey of hedge fund investor appetite and activity which found that the largest driver of fund redemptions was manager underperformance. According to Preqin Investor Interviews research, 68% of investors felt management fees to be the key area where they would like to see CFI.co | Capital Finance International
improvement. It is a sad fact that according to the Credit Suisse Hedge Fund Index, the average annual rate of return since the inception of the hedge fund industry has hovered around 7.5%. The notion of standard hedge fund fees is quickly becoming obsolete. More and more institutional investors expect to negotiate fees based on the value delivered. Flexibility, adaptation, readiness to embrace change, and a willingness to accept new ideas are widely considered essential ingredients if the hedge fund industry is to find a way forwards. While the outlook for smaller independent managers is still unclear given the high costs and demands of the business, the