Hedge fund executives are bracing for a dramatically different outlook on their industry in the year ahead, with 84% expecting increased competition, 82% bracing for increased costs and 99% believing regulation is inevitable.
After nearly two decades of tremendous growth, hedge funds will probably, once again, be relegated back to a niche investment choice for families and high-net-worth investors, executives believe.
Those were among the findings of a survey report, New World Order, by accounting firm Rothstein Kass.
However, Rothstein Kass believes the outlook may not be so grim, and that the regulations will increase transparency and, with it, faith in the industry will rise along with assets. The firm also agreed with the findings of 85% of respondents who said that marketing will become more important as the market rebounds.
As the industry recalibrates, it is imperative to retain focus on the importance of investor relationships and marketing functions, said Howard Altman, co-managing principal with Rothstein Kass. Demands on organizational resources are preventing some firms from taking steps to develop a cohesive marketing strategy. However, those firms that remain committed to increasing the framework for greater transparency, investor services and marketing will most likely be the firms that will be able to raise new capital.
Top portfolio managers will continue to leave institutions to form their own firms, Altman said. Regardless of recent setbacks, hedge funds still possess the greatest array of investment tools to help investors meet long-term goals.