This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Perceived Benefits Of Hedge Fund Regulation Deteriorates Among Investors, According To Latest Ernst & Young Global Hedge Fund Survey

Engineer says: "Investors clearly prefer greater use of equity in both the management company and funds, accompanied by deferrals and clawbacks. Managers may need to do a better job aligning their compensation arrangements with the objectives of their investors."

Selection criteria and redemptions Performance will always be a key consideration for investors when selecting a fund manager, but it is not necessarily a barrier to investing. Hedge fund managers believe that historic long- and short-term performances are two of the top criteria that investors use to select a manager. However, the survey results show that investors identify the investment team (82%), risk management (70%) and investment philosophy (66%) as the three most important initial screening criteria. This suggests that during initial selection, confidence that managers can generate strong future returns is more important to investors than actual past performance.

Managers overwhelmingly (86%) cite performance as the primary reason for redemptions, but while investors (86%) also see this as important, they are almost equally inclined (84%) to take their assets elsewhere when there are changes in key personnel. This shows that the industry remains, emphatically, a "people" business.

Tully says: "Turnover is a communication issue for funds. Managers that communicate openly and honestly with investors about changes in the team and performance issues may give investors the confidence they need about their future returns to keep them from pulling out of the fund."

Capital investments, fees and expenses To support asset growth and expansion of new strategies, nearly two in three hedge funds have either added headcount in the front office or expect to in the near future. A number of hedge fund managers say hiring has been opportunistic, particularly given the upheaval at banks. Additionally, almost 45% of hedge funds are adding headcount in support functions – middle-office, back-office, risk management and legal/compliance – to support expected growth, client demands for transparency and increased regulatory requirements.

Moreover, over half of managers are making technology investments in risk management, compliance, and investment management systems. Investors generally agree with these outlays. Two-thirds of investors say that their managers need to invest in risk management technology, and nearly 60% say their managers need to spend on investment management systems.

2 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free


Chart of I:DJI
DOW 17,081.89 -49.97 -0.29%
S&P 500 2,014.89 +15.91 0.80%
NASDAQ 4,796.6090 -42.0340 -0.87%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs