Alternative Investments Breakfast Roundtable: Current Trends in Hedge Fund Investing

Institutional investment in hedge funds is up 18% in the first half of this year compared to the same time period in 2018, according to published reports. At the recent “Alternative Investments Breakfast Roundtable: Current Trends in Hedge Fund Investing” hosted by EisnerAmper and sponsored by PENSCO Trust Company, a quartet of panelists shared their outlook on the industry.

Investors Continue to Demand Hedge Funds:

-Investors across the board, including institutions and family offices/high-net-worth individuals, are interested in allocating to hedge funds for various reasons, including to cash in on volatility, get access to uncorrelated assets, protecting their capital by generating alpha on the downside and more.

-Investors have also increased their receptiveness to alternative investment strategies beyond the traditional hedge funds such as private credit and real estate.

Strategy Spotlight:

-Investor preference for strategies varies with some solely sticking to fundamental long/short equity managers while others favor more niche offerings.

-Geographically, European and Asian managers have gained significant traction amongst investors globally.

Institutions Prefer More Concentrated Portfolios:

-Large investors feel having fewer managers will reduce risk of dilution from over-diversification.

Hedge Funds Continue to Offer More Diverse Structures:

-40 Act Funds, UCITS, Separate Managed Accounts (SMAs) and Flat Fee Commingled Funds are amongst some of the products managers offer to investors to satisfy their demands for liquidity, transparency and more.

However, these structures require more operational bandwidth by the managers given their offer of more frequent liquidity.

Fees:

-The previous industry standard 2/20 model is being replaced with 0/30, 1.5/15, 1/10 and forms of hurdles for performance fees to kick in that have not been seen before.  Additionally, many managers offer different fee models/share classes based on an investor’s appetite to lock up capital.

EisnerAmper and PENSCO Trust Company would like to thank the panelists for their insights:

-Douglas Schimmel, Managing Director/Portfolio Manager, Sandler Capital Management.

-Keith Morriss, Principal, Research, Forester Capital, LLC.

-Chris McDevitt, Head of Business Development & Investor Relations, DG Capital Management.

-Jennifer Ralph Oppold, Founder & Portfolio Manager, Alpine Peaks Capital, LP.