Capital Introduction Trends in 2010

Carbon360 has published the results of a survey they conducted over the past month entitled Capital Introduction Trends in 2010. Daniel Golyanov authored the report and asked for industry professionals to provide thoughts on future of the industry including which strategies would be popular in the near term future, where investors are based, and the evolution of the industry in the next five years.

HedgeCo’s managing partner, Evan Rapoport added his own thoughts that were used as an opening quote:

As the hedge fund industry stabilizes, we expect investors to become more active. 2010 should be a prosperous year for alternative investments. The managers and investors who survived 2008 and 2009 are the cream of the crop, providing third party marketers and capital introduction firms with a vast array of opportunity. As hedge funds go, so goes the capital introduction industry.

In that mode of thought, transparency and risk management are the popular trends. I would expect new regulations to affect how third party marketers and capital introduction teams are able to conduct business. But this change is not to be feared, but rather embraced. If we can work with regulators to legitimize the industry and overcome the scandalous actions of a select few, I am all for it. This will be a major theme ongoing.

I expect institutional investors to be more receptive to newer managers, fee structures to remain stable, and foreign investors to invest more in the US and vice versa. Europe should lose market share to Asia, and new markets will open up as countries move from developing markets to developed markets. Proprietary trading and hedge funds owned by large US banks will most likely weaken or disappear under the current administration and, more importantly, current US economy sentiment, leading to opportunities for independent investment management companies. Overall, I expect 2010 to build on the strength of the latter half of 2009.

The most interesting conclusion on the industry, according to Golyanov, is that the majority of third party marketers work with new and emerging managers and that these are the very funds that are expected to see the majority of consolidation in order to compete with larger and established managers.