The tides could finally be turning for hedge funds hindered
by high fees, poor investor sentiment, and unexciting returns,
according to a new report from alternative investment research
Hedge funds managers appear to be more optimistic about the
fundraising and return environment than they were a year ago,
according to Preqins Hedge Fund Manager
Outlook, published on Tuesday. Just 30 percent of
managers surveyed by Preqin said the fundraising environment is
tougher than it was a year ago, versus nearly half of all fund
managers saying that at this time last year. Accordingly, some
47 percent of managers surveyed said they have a positive
outlook on the hedge fund industry for the second half of the
One reason for the optimism is improved performance. Two
thirds of fund managers surveyed reported meeting or beating
their funds return objectives in 2017, per Preqin. In
2016, just half of fund managers reported doing the same,
according to the report. Preqin reports that its All-Strategies
Hedge Fund benchmark has returned more than 11 percent over the
past 12 months, with some strategies, like event-driven,
producing performance in the mid-teens.
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Paradoxically, the managers also said that investor
attitudes toward hedge funds have gotten more negative over the
past year, with 36 percent of managers saying investor
sentiment is more negative than it was a year ago, versus 24
percent saying it has gotten more positive.
Despite an improved returns environment and positive
asset flows indicating investor concerns may be declining, fund
managers reported that investors remain largely negative in
their attitudes towards hedge funds, according to the
The report noted that hedge fund managers think their most
significant challenge is overcoming investor concerns about the
asset class, particularly their questions about hedge fund fee
structures. According to Preqin, allocator demand for more
favorable fee structures is whats driving the most change
in the hedge fund industry at the moment.
Managers, though, are working on making major changes.
During the first quarter of 2017, hedge funds were
able to perform their best since 2009. And that trend continued
during the second quarter, the reports authors noted,
with funds recording more than $25 billion in inflows during
As a result, assets under management in the hedge fund
industry reached an all time high of $3.38 trillion during the
Part of the reason for the bump, though, is the geopolitical
Political events have largely led to improved hedge
fund performance; for instance, the Trump Bump
the market rally following President Trumps
electoral victory last November had the most significant
positive impact on the performance of hedge funds
globally, according to the reports authors.
The authors also pointed to Trumps reform policies and
Brexit as other factors that helped to improve performance.
Things are looking up for hedge fund managers, so much so
that some are looking to launch new funds in the second part of
the year, according to the report. Thirty four percent of those
surveyed said they plan to launch a fund in the second half of
2017. The market fund managers are most interested in?
Interestingly, credit strategies.
With positive inflows from investors at the start of
the year, fund managers are seeing opportunities to launch new
funds, according to the reports authors.