According to Preqin’s latest research, 60.7% of institutional investors believe there has been a shift in favour of the investor in the terms and conditions associated with hedge funds. The management fee is viewed as “most improved” over the past 12 months, following a two year period where this has been under much scrutiny. Improvement in performance incentives has lagged behind management fee and over a third of investors would like to see further changes both in the level of performance fees being charged as well as in the way it is charged. Institutional investors are continuing to enter into fee negotiations with their managers. There has been an increase in the number of investors which have successfully negotiated more favourable terms with their fund managers, now standing at 38% of investors up from 31% in 2009. Second to management fees investors have noted changes in fund transparency and liquidity however greater improvement is sought in these areas. Nearly half of institutional investors surveyed have rejected a fund due to lack of transparency and 53% would still like to see funds become more transparent in their sources of returns.
Investor confidence is returning to the asset class. If managers continue to listen and respond to the demands of an evolving institutional market this period of renewed optimism of investors is likely to continue. This in turn could lead to more capital inflows to those managers which are able to offer funds which have adapted to cater to the new requirements of the institutional investor.
For more information and to arrange a demo of Preqin’s Hedge Fund Investor Profiles database please click Hedge Investor Profiles