Hedge funds face a glut of competition
HEDGE fund managers are buckling down for a trying year, as regulatory oversight and competition lead to a glut of market dogfights.
A report out today by accounting and audit firm Rothstein Kass shows seven out of 10 expect a “trying” year as the extra competition leads to more funds chasing investment dollars.
“It is no surprise that the outlook for 2010 echoes the concerns of 2009 rather than the unbridled optimism of years past and reflects a more conservative approach to the future,” Rothstein Kass consultants wrote.
Hedge funds rebounded last year from 2008’s deep losses with an average 19 per cent return. But this year’s market gyrations highlight the pitfalls that are still present two years after the financial crisis.
Many prominent managers were caught off guard by May’s sharp sell-off and nursed heavy losses that left the funds, on average, roughly flat for the first five months of the year, data from Hedge Fund Research shows. June’s performance numbers are expected next week.
At the same time though, there are some bright spots with almost three-quarters of the managers saying they expect investors to stick around longer as the pace of redemptions falls off.
Rothstein Kass surveyed 381 hedge fund firms in the first half of 2010.
Eight out of 10 managers also expect to see more new hedge funds launched this year by newcomers and by existing firms that are planning to roll out new portfolios.
Halfway through the year, prominent managers ranging from former Goldman Sachs partner Mark Carhart to former Atticus executive Dilan Siritunga are talking to investors about making commitments to new funds.
However, hedge fund managers also said it is tougher to raise money now because investors are more nervous.