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RESEAR CH


Fig.7 Biggest challenges facing the hedge fund industry in 2014 according to fund managers Source: Preqin Hedge Fund Manager Interviews, November 2013


Challenges faced in 2013


0% 10% 20% 30% 40% 50% 60% 70% 80%


Challenges faced in 2014


68% 60% 48% 45% 32% 29% 23% 10% 21% 48%


“More fund managers reported fulfilling investor demands as a significant challenge for 2014 than in our previous study at the end of 2012.”


Performance Regulation


Ongoing volatility and uncertainty in global markets


New fund launches A quarter of all fund managers that participated in the study stated that they plan to launch a new hedge fund over the course of 2014. There are some regional differences within this group of fund managers; 30% of Asia-Pacific-based fund managers have plans for a new launch in 2014, compared to 24% of North America-based fund managers and 21% of Europe-based fund managers. The Alternative Investment Fund Managers Directive (AIFMD) has had a negative impact on the number of fund launches within Europe, and with fewer fund managers in the region planning to launch funds in 2014 than in other regions, this trend looks set to continue over the year ahead, and we may see a reduced number of fund launches from the region until the full effects of the AIFMD become clear.


Four-fifths of fund managers with plans to launch new vehicles intend to do this in the first half of the year (see Fig.6); therefore we could witness an influx of new fund vehicles in the early part of 2014. 54% of fund managers that plan to launch new funds in 2014 stated that their fund will pursue a strategy that is new for the firm. This is a significant decrease from the proportion of fund managers that gave this response to this question in Preqin’s survey at the end of 2012. In this study, 89% of respondents stated they will be looking to launch a new strategy for the firm, indicating that more fund managers are focusing on the strategies and sectors they know best in 2014 compared to 2013, when more fund managers were looking to exploit previously untapped strategies.


Challenges for fund managers Fundraising has been a significant challenge for fund managers over the past several years, as


20 Fundraising


Fulfilling investor demands


investors have become more selective following the fallout of 2008 and much of the fresh capital has flowed predominantly to just a handful of the most established names.


However, many fund managers are seeing a lightening of the fundraising burden in 2014, and there has been a significant drop in fund managers naming fundraising as a significant challenge, from 48% in 2012 to 23% in 2013 (see Fig. 7).


More fund managers have reported that generating strong performance is the key challenge for 2014, compared to the managers that participated in Preqin’s survey at the end of 2012, although in both studies this was the leading challenge the participating managers faced.


A Preqin survey of institutional investors in December 2013 showed that investors view the returns of hedge funds as the most important factor they assess when selecting new fund opportunities and also that the primary objective of their hedge fund portfolios is to generate strong absolute returns; therefore, it is vital to post good returns in order to attract, as well as to retain, investors.


More fund managers reported fulfilling investor demands as a significant challenge for 2014 than in our previous study at the end of 2012. With fundraising becoming less of a significant concern, and performance and fulfilling demands becoming more prominent challenges for fund managers, it is clear that these fund groups believe posting solid return figures, as well as listening to their investors, is a sound strategy to ensure that fundraising stays on track. THFJ


PROPORTION OF RESPONDENTS


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