Hedge Funds Are Marketing Transparency Better

February 14, 2011

Hedge funds may be taking risk management and transparency more seriously than their other financial brethren, in part due to an influx of capital and interest from large institutional investors, reports Reuters.

The article quoted a Preqin research survey of 60 hedge funds that said capital sourced from institutional investors had grown from 45 percent to 61 percent, since 2008. While more institutional money is flowing in, hedge funds are also adapting for these investors, with tougher risk management, greater transparency and in some cases, lower fees.

“The consensus is clear: hedge fund managers are witnessing large inflows of capital from institutional investors, and are adapting their fund strategies and marketing accordingly,” Amy Bensted, manager of hedge fund data at Preqin, said in a statement.

The influx of capital is also shifting the focus of the hedge fund industry from an asset class that previously focused on wealthy individuals and family offices to one that is now looking more to institutional money.  And hedge fund managers overwhelmingly predict that institutional capital will become more important to the industry over the next 12-18 months. Nearly 85% of all fund managers surveyed stated that they expect the proportion of their assets coming from institutional investors to increase over this time period.

Hedge fund marketing to target these large, institutional investors is shifting, too. 78% of the fund managers interviewed by Preqin market to institutional investors through their own internal sales force, with teams of client service professionals who source and form relationships with institutional investors.

However, 43% of respondents said one of the greatest challenges they have when marketing to institutional investors is arranging meetings. So many fund managers are turning to external groups to assist in specifically marketing to the institutional arena. 35% of managers interviewed by Preqin have formed relationships with institutional consultants to promote their funds to the wide audiences of institutional investors.

Roughly 30% of fund managers enlist the help of third-party marketers and prime brokerage capital introduction services. One-fifth of fund managers participating in the study utilize third-party database providers to market specifically to the institutional market.

You can read the executive summary of the survey at the Preqin website.

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