Managers and Investors Identify Performance as a Key Challenge Facing the Hedge Fund Industry

by Samuel McKenzie

  • 13 Oct 2015
  • HF

Preqin’s most recent Hedge Fund Manager Outlook research report surveyed over 150 hedge fund managers. Some of the most interesting takeaways from the survey were hedge fund managers’ perceptions of the most important challenges hedge funds face in the industry today and the key drivers of change in the future. 

According to fund managers, poor performance is by far the biggest challenge facing the industry today. Twenty-two percent of those surveyed said that this is the key challenge within the industry, despite the fact that the Preqin All-Strategies Hedge Fund benchmark shows hedge funds have outperformed the S&P 500 during the first half of 2015 (net returns of +2.88% versus +0.42% in Q1 and +1.46% versus -0.03% in Q2). Data from the Preqin Investor Outlook: Alternative Assets, H2 2015 shows that institutional investors harbour the same concerns, with 44% of respondents identifying performance as a key issue facing the hedge fund industry.

Regulation is cited as a key challenge by 13% of fund managers, shown in the chart above. Navigating the regulatory landscape of the hedge fund industry appears to be a constant challenge for a significant proportion of fund managers. Of managers surveyed, only 23% believe regulation has changed the industry for the better.

Fifty-six percent of managers surveyed expect increased market volatility to be one of the key drivers of change in the industry in H2 2015. Given the recent turmoil in equity markets, increased volatility will undoubtedly be playing on the minds of hedge fund managers heading towards the end of the year.

Two key drivers of change identified by managers were greater transparency (41% of respondents) and fee pressure (37%). Twenty-seven percent of investors surveyed said transparency was a key issue facing the industry in H2 2015 and 35% identified fees as a key driver of change; hedge fund managers are clearly taking note of investor concerns.

Ultimately, fund performance appears to be the greatest challenge facing the industry according to fund managers, with volatility cited as the key driver of change during Q2 2015. The familiar topics of fees, transparency and performance are deemed by investors to be key drivers of change during the remainder of 2015.

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