Nadel’s 2014 Hedge Fund Industry Predictions:
· While the last couple of years saw an influx in pension money coming into the industry, the expectation is that this year will see a big increase in inflows from family offices, especially starting in Q2.
· Based on conversations with many managers and various experts on the economy, given the changes in the Fed’s view about maintaining low interest rates, the economy should really start feeling the impact of this by Q2/3. This could have adverse consequences for traditional long only products and real estate, and could benefit alternative investment strategies.
· For many managers, the AIFMD rules shouldn’t have a major impact as they alter how they accept European money and some of the more hedge fund-friendly EU countries soften their regulations.
· By the second half, as the JOBS Act’s Rule 506(c) approaches its first anniversary, we can anticipate some proposed rules concerning performance advertising for hedge funds seeking to market in a public manner. We can also expect some very creative profile-raising public advertising campaigns to be undertaken by a number of managers.
· The number of new funds with founders share classes will rise dramatically in 2014, especially as funds look to attract more institutional capital.
· As private equity-like investments become more popular in many hedge funds, don’t be surprised to see a return in popularity of the two year incentive allocation (with clawback) concept.
· With the increased complexity in executing trades brought on by Dodd Frank, many managers running side by side structures will explore converting to the more operationally-efficient master-feeder structure.
· Driven again by institutional requirements, it is expected that there will be even more “funds of one” created in 2014 than last year.
· With much pressure from the industry, the CFTC will likely finally pass harmonizing legislation making it possible for Rule 4.13(a)(3) exempt funds to rely on Securities Act Rule 506(c) and thus advertise.
· While insider trading will continue to be on the SEC’s radar, the SEC will look more closely at other areas such as valuation as well as conflicts between the manager and the fund.
Editing by Alex Akesson
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