Hedge funds will receive more than a quarter of their capital inflows from pension funds and sovereign wealth funds, and institutional investors will exceed high-net-worth individuals as the funds’ primary sources of investment by 2020 as the industry undergoes sweeping changes, concludes a survey of hedge fund managers by KPMG International.
Almost 70 percent of hedge funds also plan to start offering custom investment options at some point over the next five years while more than two thirds say they will seek to attract increased investment through specialized fee structures, according to ‘Growing up: the new environment for hedge funds’, a report carried out in collaboration with the Managed Funds Association and the Alternative Investment Management Association.
‘Our survey shows the transformative change affecting every aspect of hedge fund management, from product mixes and fee structures through to markets and investor types,’ says Robert Mirsky, global head of hedge funds at KPMG International, in a news release announcing the study. ‘The managers we spoke to around the world recognize that the industry must continue to adapt and adjust strategies in order to thrive.’
The study shows that about 46 percent of hedge fund managers will either alter their investment strategies or launch new products to attract more investment from pension funds. At the same time, most managers predict corporate and public pension funds will constitute their major source of capital by 2020.
Capital inflows from Asia, the Middle East and Africa will increase at a faster pace in coming years than inflows from Europe and North America, shifting concentration from the funds’ traditional sources, while 40 percent of hedge fund managers expect to change the markets they invest in, with more than a third of those switching to emerging and frontier markets, the study predicts.
Three quarters of managers cite regulation as the major threat to hedge fund growth in coming years. Eighty percent of managers in Europe and Asia-Pacific say regulation will be the major hurdle to growth and 67 percent of managers in North America say the same thing.
