As the hedge fund industry matures, most managers are increasingly focused on growth, shows EY’s annual survey of the global hedge fund market.
But there’s a catch—while managers want to grow through new products and distribution channels, investors aren’t necessarily planning to increase their investments. The survey found 72% of investors expect to maintain their current allocation levels.
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The report also finds that as investor and regulatory demands grow, managers are focusing relentlessly on operational efficiency and costs in the battle to maintain margins.
Two in three managers reported an increase in revenues over the past year, as their performance improved and assets grew but, only half reported improvements in margins, says the report.
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One in three managers surveyed said margins declined, and another 10% noted margins remained unchanged as costs increased. Meanwhile, 58% of managers in North America noted that costs have increased.
Though managers and investors may be at odds when it comes to growth, they agree on the growing demand for customized solutions. Nearly two-thirds of investors either already invest or would like to invest in a customized product, EY reports. Managers in the U.S. are already offering customized solutions, with 75% either already offering, or planning to offer, them. EY expects this to grow in Canada.
Customization was especially popular among funds of funds, shows the survey, with nearly 70% of funds of funds already investing in a customized solution and another 15% saying they would like to.