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Rothstein Kass Survey Finds Nearly Half Of Hedge Fund Managers Expect Difficult Year In 2012

Press Release – Rothstein Kass, a leading professional services firm to the alternative investment community, has published its sixth annual report on hedge fund industry trends. “Hedge Funds 2.0: Evolution in Action” features the findings of a first quarter 2012 survey of 400 hedge fund managers, representing 771 hedge fund vehicles.

Survey participants were asked to weigh in on a broad range of topics including investment outlook, operational issues and regulatory concerns. Roughly 48 percent of hedge fund managers surveyed indicated that 2012 will be a difficult year for the sector, with nearly 40 percent expressing concern that the United States could enter a “double-dip” recession. Findings suggest that amid ongoing economic uncertainty, hedge fund managers continue to find opportunity, as slightly more than 66 percent of respondents indicated that they plan to raise assets by 25 percent or more this year. Nearly one-third of hedge fund managers do not plan to use leverage in 2012, while over half intend to use less than 2:1 leverage this year.

“In the months following the global economic meltdown, many observers predicted doom for the hedge fund industry, with some anticipating that a more aggressive regulatory agenda and challenging market conditions would lead to significant attrition. At that time, Rothstein Kass stood out as one of the few voices that forecast that the hedge fund community would emerge from the crisis stronger than ever. Our confidence was instilled over decades spent working closely with the sector, and was reinforced by our long-standing view of the industry’s institutionalization,” said Howard Altman, Co-CEO of Rothstein Kass and Principal-in-Charge of the Financial Services Group. “This year, our research shows an industry that continues to benefit from institutional asset flows and efforts to enhance transparency. At the same time, managers are cognizant of the challenges that lie ahead, as legislative efforts move from theoretical to reality.”

Over 70 percent of survey participants report assets under management (AUM) under $500 million, with the remainder reporting AUM in excess of $500 million. Findings suggest that increasing asset flows from pension funds and other institutional investors continue to fuel demand for enhanced transparency. Nearly a third of hedge fund managers polled believe that investor due diligence will take six or more months to complete. Regulatory developments also weigh heavily on managers, as over half indicated concern about the scope and frequency of reporting requirements. Over 40 percent suggested that they are concerned about the staffing and resources that will be required to comply with enhanced reporting requirements. Approximately 30 percent of funds with less than $100 million AUM have registered with the SEC, according to the research.

“Hedge fund managers are often confronted with a growing array of responsibilities that can detract from the overall focus on generating investment returns. For many institutional investors, operational and reporting capabilities are as important as investment performance. With competition for capital intense and due diligence processes expanded, the imperative for all funds – especially emerging managers – to ‘act institutional’ in all respects has never been greater. Fortunately, we’re seeing the emergence of a new generation of hedge fund managers that are well-equipped to tackle this challenge. These professionals have grown up within the hedge fund sector, developing the specialized expertise required to position their firms for success in the future,” said Mr. Altman.

Among other notable survey findings: 

  • Nearly 80 percent of respondents believe seeding is critical to a successful launch this year
  • UCITS vehicles, despite their popularity in Europe, have yet to infiltrate the U.S. marketplace. Of the 400 hedge fund firms and 770 funds polled, only 17 UCITS products were reported
  • The percentage of women and minority owned firms remains low, at 5.8 percent and 10.3 percent, respectively. However, firms that have launched in the last three years are three times more likely to report 50 percent or more women and minority ownership

“A major part of the hedge fund industry allure is the diversity that the community has come to represent. The sector’s proliferation means that there are funds and strategies suited to a wide range of specific investment objectives. Until very recently, however, this diversity has not extended to the number of women in senior roles at hedge fund complexes. One of the most encouraging findings of our latest research suggests that women are finding increased opportunity at emerging hedge funds. From our experience, we’re seeing growing interest from entrepreneurial women seeking to launch hedge funds, as well as growing consensus that greater concentrations of women in the industry will bring needed perspective as the sector continues its evolution,” said Kelly Easterling, Principal-in-Charge of Rothstein Kass’ Walnut Creek office.

About Rothstein Kass:

Rothstein Kass is a premier professional services firm that has served privately held and publicly traded companies, as well as high-net-worth individuals and families, for more than 50 years. As trusted advisors to our clients, Rothstein Kass provides accounting, auditing and tax services, as well as a full array of integrated services, to clients across industry spectrums and in all stages of organizational development. At the core of Rothstein Kass’ remarkable success lies our commitment to hiring, developing and retaining a team that possesses an entrepreneurial spirit mirroring that of the sophisticated business and financial services communities that we serve.

Rothstein Kass Business Advisory Services professionals provide value-added and result-oriented consulting services to clients across industries in the areas of strategy, operations, technology, risk, compliance, dispute resolution and investigations. Rothstein Kass Business Advisory Services, LLC is an affiliate of Rothstein, Kass, a premier professional services firm serving clients for more than 50 years.


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