The hedge fund industry is always marked by change and evolution, starting with innovative strategies, asset diversification and the arrival of new players. To navigate this shifting landscape, it is crucial to understand the trends driving it. We have analysed the most recent changes and trends that have emerged over the past two weeks, revealing some of the events that are shaping the industry.
Hedge Fund Fees: Clients’ Profits Halved by Exorbitant Charges
Clients of several multi-strategy hedge funds are facing a stark reality: their profits are being slashed in half by exorbitant fees. For every dollar these funds generate, clients are left with a meager forty cents. Even the industry’s top performers see their earnings decimated once fees are taken into account.
The traditional “2+20” model (a 2% management fee and a 20% performance fee) is rapidly becoming a relic of the past. In its place, we find funds that keep all the profits for themselves, leaving clients with nothing. This fee-driven approach has led to a shrinking market share, leaving funds with less money to cover operational costs.
One possible explanation for this trend is the high demand for these funds. Clients are drawn to their ability to distribute trading risk, which provides a valuable service. However, a critical question remains: Can these funds justify their exorbitant fees when they effectively nullify all client profits?
This information is based on the article analysed and reported by ThePlatform’s analysts team: https://www.bloomberg.com/news/articles/2024-02-12/some-multistrategy-hedge-funds-keep-over-half-their-profits-via-customer-fees
Losses Lead Talpin’s Element to Fourth Capital Cutback, Targeting Fewer Investors
Following a year of losses, the Capital Management of Element Hedge Fund intends to lower the internal capital of the Fund for the fourth time, with fewer investors. The goal is to manage fewer assets and increase earnings.
With a fund that has generated annualized gains of nearly 15%, Talpin has been one of the most renowned and sought-after macro traders in the hedge fund market. He assured clients that all of their investments had generated good returns over time. Talping has decreased his capital four times in an attempt to have fewer outside investors and shift the company’s assets toward internal capital.
This information is based on the article analysed and reported by ThePlatform’s analysts team: https://www.bloomberg.com/news/articles/2024-02-14/downsizing-hedge-fund-element-aims-to-run-mostly-internal-cash
SEC Implements New Hedge Fund Reporting Rules
The SEC approved new rules regarding information that Hedge Funds have to share confidentially about their investment strategies, in particular regarding investments, borrowing and counter-party exposure, these regulations are made in order to prevent and reduce risk in the financial system.
Hedge Funds have to share confidential information quarterly to the US government, not all this information can be made public, but regulators can use it. However, on the other side, the Managed Funds Association said that these new regulations will reduce regulators’ ability to monitor risks.
Another expected rule is that Hedge Funds will have to inform the government regarding their crypto investment strategies. It’s important to note that this new regulation will only concern some types of hedge funds, in particular those with dimensions exceeding 500 million dollars.
This information is based on the article analysed and reported by ThePlatform’s analysts team: https://www.bloomberg.com/news/articles/2024-02-08/hedge-funds-must-share-more-on-their-strategies-under-sec-rule
Hedge funds changed their perspective on US dollar
According to Citybank, one of the largest trading banks, most hedge funds have changed their expectations regarding the future price of the US dollar, as more than 80% of these funds have decided to close their short position on it. They have expectations of a bullish trend and many investors have followed this direction. One possible explanation for this bullish bet is that the US economy saw jobs grow by about 350,000 in the past month.
This information is based on the article analysed and reported by ThePlatform’s analysts team: https://www.hedgeweek.com/hedge-funds-flip-from-bearish-to-bullish-on-us-dollar-bet/
Bill Ackman is launching an Innovative US Investment Portfolio with Lower Fees and Enhanced Accessibility
Pershing Square founder Bill Ackman appears to be launching a new investment portfolio that replicates his hedge fund by listing it on the New York Stock Exchange. Thus allowing retail investors, pension funds and endowments to invest in it.
Ackamn will also place a very low fee on this portfolio, equal to a fixed 2%, which seems to be very attractive given the excessive performance fees of other hedge funds which are between 15% and 30%. It will be a closed-end fund that will raise the funds through an initial public offering and Akcman will therefore be able to exploit its 1.2m followers on platform X to receive capital.
This information is based on the article analysed and reported by ThePlatform’s analysts team: https://www.hedgeweek.com/ackman-looking-to-widen-investor-base-with-new-cut-price-fund/
Private Equity, Renewable Energy, and Hedge Funds Expected to Lead Alternative Asset Inflows in 2024
Finally, according to some research carried out by fund management solutions specialist Carne Group, it is thought that the asset that will grow the most in 2024 will be those relating to private equity, renewable energy and hedge funds.
According to the majority of asset managers, Private equity will be the asset with the greatest growth this year when choosing among the alternative asset classes.
Furthermore, fund managers have noticed a large increase in new funds this year, and there is thought to be an increase in the flow of capital into funds, with an expected growth of 8%. Also predicting an increase in third-party providers in funds, this could be useful for speeding up processes, and greater trust in fund management.
This information is based on the article analysed and reported by ThePlatform’s analysts team: https://www.hedgeweek.com/managers-tip-increase-in-pe-and-hedge-fund-inflows-in-2024/
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