RSM, in collaboration with AIMA have issued their latest research ‘In Harmony – how investors continue to strike the right note in aligning their interests’, following the ‘In Concert’ paper which was published three years ago.
‘In Harmony’ builds on those findings, examining to what extent these trends are continuing, as well as identifying how hedge funds and investors are aligning interests that best meet their mutual needs.
Assets under management for the hedge fund industry continue to break new records, attracting an increasing number of institutional investors. Their views and expectations of hedge funds have brought about significant changes impacting the overall industry. This new revolution centres on three Cs – customisation, collaboration and communication.
Bespoke investment mandates, value advisory services and deeper partnerships are a result of the industry’s institutional experience and sophisticated investor base driving these industry changes. Investors and managers are exploring new approaches to negotiate fees and fund terms and hurdle rates are more widespread, while the widespread use of the ‘2 and 20’ compensation model has now been consigned to the past. In essence, a new equilibrium in on the horizon.
Other key findings
- Over 75% of managers see a mutual desire for a long-term investment commitment or an exchange of knowledge with investors as essential.
- The importance of ‘skin in the game’ to demonstrate partnership was confirmed by 76% of surveyed managers, who revealed they have significant personal capital invested in their funds.
- Nearly all respondents have a performance fee high-water mark with their investors and almost 40% use hurdle rates to set a minimum return for client(s) before a performance fee can be charged.