RESEAR CH
Global Fund-Raising Trends Will this year match a strong 2013? JAMES E. LAWLER, GEORG H. MACHINIST and SUNIL B. SACHDEV, VANTAGEPOINT ALTERNATIVE INVESTMENTS
Fund-raising recap for 2013 2013 was a strong year of fund-raising for single- manager hedge funds. Long/short equity was the big winner last year. Many of the institutional investors we speak to have become concerned with the rapid rise in the markets in 2013 and say they will be focusing on strategies that are less dependent on beta, namely event-driven, market neutral and European equities. We are now more than two months into the year and many of these investors are being proven right. Stock picking and good shorts have saved some good managers from what for many funds was a tough start to the year.
Fund-raising in Europe Managers looking to raise capital in Europe have been left confused by the opacity of current AIFMD legislation. This has resulted in firms taking three differing directions when it comes to European marketing:
1. Completely shutting down all marketing to European investors;
2. Only reaching out to select, pre-qualified investor relationships, and
3. Continuing to market to Europe in the same way as they had prior to the implementation of AIFMD.
A number of our European investor contacts have informed us that they have seen significantly less fund flow. Even some of the most active institutions and funds of funds in the UK and Western Europe have noticed many fewer prospective funds reaching out to their investment teams. The new marketing rules have posed a particular issue for North American fund managers looking to build an offshore presence, as most Middle Eastern and Asian investors tend to favour larger, more established fund managers. Many early-stage investors are located in the financial epicentres of Europe such as London, Paris, Geneva and Zurich. This may pose an issue for early-stage fund managers who are trying to reach critical mass (especially through managed accounts and offshore funds), requiring them to register in each locale and meet heavy transparency and reporting requirements. While the AIFMD poses issues for managers looking to market to the EU there are still ways to access European investors.
While the second half of 2013 was dominated by requests for long/short equity and equity event- driven, strategy interest in early 2014 has been more diversified. We have seen people increasing their searches for equity market neutral, macro, and multi-strategy funds in the beginning of this year. Distressed has also been a key focus for certain investors who are looking to capitalise on European and emerging market volatility. We have also seen a slight uptick in relative value strategies as investors shy away from major directional bets.
44 Europe Fig.1 Investors surveyed by type Source: VantagePoint Alternative Investments
Pension funds
Family offices
Foundations Wealth managers
Endowments
Funds of funds
Fig.2 Investors surveyed by location Canada Asia South America Middle East
Source: VantagePoint Alternative Investments
United States
Fig.3 2013 commitments by investor type Funds of Funds Foundations Wealth Managers Family Offices
Source: VantagePoint Alternative Investments
Endowments Pension Funds
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