BOSTON (HedgeWorld.com)–Hedge funds still are trucking down the path of profitability despite some noteworthy obstacles thrown in the way by investors and regulators this year.
New distribution channels are opening up to hedge funds, as they prepare to add regulatory compliance vernacular to their business models. At the same time the nagging fears over opaque portfolios and lack of performance have yet to subside.
Combining data from three separate surveys, Cerulli Associates found that the recent bear market bolstered hedge fund managers; that investors are still leery of high fees; and that the hedge fund industry is concerned about the Securities and Exchange Commission's actions and the perception that hedge funds have performed poorly of late.
Bullish analysts at Cerulli said in a report titled "Hedge Funds: The Market for Absolute Return" that the hedge fund industry could more than quadruple in size by the end of the decade, shoving aside doomsday scenarios that predict capacity issues could burst the hedge fund bubble.
The idea that hedge funds are performing poorly is up for little debate. In October, each of the major hedge fund indexes reported losses that likely will be difficult for hedge funds to overcome by year end.
Roughly 36% of the hedge fund managers surveyed by Cerulli said they believed that future hedge fund growth rested on the industry's ability to mitigate performance concerns. About the same number said the hedge fund business's ability to prevent seismic collapses was important in maintaining investor interest. Managers also expressed worry over what the SEC plans to do next.
Cerulli collected its qualitative analysis through interviews with 100 "industry insiders," including asset managers, distributors and administrators. Cerulli's surveys looked at: hedge fund and long-only managers' attitudes toward growth; funds of hedge funds' and investment consultants' mining of managers; and advisers' views on hedge funds reaching the retail market.
