Gwyn Roberts

14/06/2011 Author: Gwyn Roberts

Editor's view: 16 June 2011

With performance slow, but inflows picking up pace, 2011 could well be a year where this sector’s growth is propelled by a rare bout of asset gathering, rather than asset appreciation. In the short term, hitting those institutional thresholds through investor largesse is fine, but soon the funds that have benefited from the wave of recent interest will have to ask themselves an important question – ‘what type of business are we in?’

Here in the US, a resurgent sector is currently pondering this topic. The majority know that to justify the 2/20, it’s just not good enough to rely on inflows and bigger and better sales teams. Brand is important, but performance still remains key. However, the industry debate goes beyond the precise method of how to grow and is questioning the current mind-set that hedge fund businesses must rely on scale to be successful.

Going after the large investments could well over-stretch managers, destabilising firms and strategies. Instead, small and ambitious firms should also consider different options. We know from last week’s HFM US Breakfast Briefing that family offices, with money to spend, feel let down by funds’ insistence on pitching to them as if they’re pension funds.
We are also cognisant that funds of hedge funds are seeking diversification through exposure to smaller funds.  An institutional backbone is vital, but a fund doesn’t have to be large, or an unthinking asset gatherer, to prosper.   

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