The 10 th annual survey found that hedge fund growth has slowed for a variety of reasons - the abundance of low fee passive investment options, lackluster hedge fund performance and cost concerns. In 2016, the proportion of North American investors that said they were reducing allocations to hedge funds exceeded the proportion that were increasing for the first time since the financial crisis of 2008. Investors have more options than ever within the alternatives marketplace and are allocating funds to those managers that have a unique offering that is satisfying a specific need. Therefore, hedge fund managers must be at the forefront of actively listening to their investors to keep pace, or else be left behind, the report finds. Michael Serota, EY Global Leader, Hedge Fund Services, says: "Growth is the industry's top priority, but managers are changing the strategies employed to achieve it. While we find the largest managers pursuing several growth strategies, the smaller managers are more narrowly focused, seeking to expand investor bases within their home markets. Amidst today's challenging environment, it is imperative for managers of all sizes to identify the needs of their clients and align product offerings to their demands." Hedge fund managers focus on asset growth to counter reduced inflows More than half (56%) of managers say asset growth is their first priority, but they are also facing an unprecedented change in investor appetite that can affect growth strategies. Almost half (48%) of investors expect their hedge fund investments to shift from traditional hedge funds to other alternatives over the next three to five years, while 42% expect to shift from co-mingled hedge funds to customized vehicles and segregated accounts.