Agecroft Partners’ Top 10 Hedge Fund Industry Trends for 2016

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Agecroft Partners’ Top 10 Hedge Fund Industry Trends for 2016

Postby investorsdna » Tue Jan 19, 2016 10:49 am

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Agecroft Partners’ Top 10 Hedge Fund Industry Trends for 2016

1. Reduction of expected returns for a diversified Hedge Fund portfolio. Hedge fund performance is driven by a combination of alpha (manager skill) and beta (market driven return). From 2009 to the beginning of last year, as both the fixed income and equity markets experienced strong bull markets, beta had been a tail wind for hedge fund performance that rewarded managers with net long market exposure.

2. Greater Demand for Hedge Fund Strategies with Low Correlations to Long Only Benchmarks. Lower return expectations for hedge funds will dramatically change the relative demand for hedge fund strategies.

3. Hedge Fund Industry Assets to Reach All Time High in 2016. Despite all the negative stories about the industry, including some recent high profile fund closures, total hedge fund industry assets will reach a new all-time high in 2016.

4. Smaller managers will outperform. While many studies have shown stronger performance by younger and smaller funds, the 2016 landscape should provide a particularly attractive environment for smaller hedge funds.

5. Pension funds reducing the average size of managers to whom they allocate. As pensions struggle to enhance returns to meet their actuarial assumptions, we will also see an increase in the speed of the evolution of pension funds’ hedge fund investment process.

6. High quality marketing is essential for asset growth. The hedge fund industry is highly competitive with our estimate of over 15,000 hedge funds in the market place. In 2016, we will have continued concentration of hedge fund flows into a small percentage of managers. We expect 5% of funds to attract 80% to 90% of net assets within the industry.

7. Increased Hedge Fund Marketing Activity outside the US. Marketing activity outside of the US has declined significantly over the past few years due to AIFMD requirements becoming effective within the Euro-zone.

8. Continued pressure on fees. The hedge fund industry is seeing pressure on hedge fund fees from many fronts. L

9. More Hedge Funds Shutting Down.

10. Blurring of the lines between hedge funds and private equity funds.

source: via @hedgethink

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