SEI Study: Hedge Fund Managers Face Tough Business Climate and Heightened
Study Identifies Six Requisites for Long-Term Success
OAKS, PA -- (Marketwire) -- 03/26/13 -- A new study conducted by
SEI (NASDAQ: SEIC) in collaboration with Minard Capital LLC finds
that hedge fund managers must rethink their business models, provide
tailored solutions, and offer multi-faceted client communications.
This amidst a climate in which investors are heavily scrutinizing the
industry's value proposition. SEI's insights are based on the
company's sixth annual global survey of institutional investors, as
well as insights from nearly 50 hedge fund managers, investors, and
consultants who participated in roundtable discussions in New York
and London organized and moderated by Minard Capital.
"With an increasingly crowded field of competitors, rising
institutional demands, and a decade of disappointing overall returns,
hedge funds are at a critical juncture," said Ross Ellis, Vice
President, Knowledge Partnership for SEI's Investment Manager
Services division. "Based on what we heard from institutional
investors and fund managers, it's time for the industry to make an
evolutionary leap in proving its worth to a hungry yet hesitant
"Success in identifying, securing, and retaining institutional and
private client assets today requires new tactics. These include a
defensibly true and transparent investment process and a competitive
edge that is verifiable internally and corroborated by the investor,"
said Rachel S.L. Minard, Founder and CEO of Minard Capital. "Managers
must know how to defend their edge against competitors, investment
instruments, and vehicles investors now have at their disposal to
meet their risk/return targets."
The study, "6 Ways Hedge Funds Need to Adapt Now," identifies key
challenges hedge fund firms must meet if they hope to succeed in the
-- Sustainable edge. With 7 in 10 survey respondents asserting that
"there are too many look-alike strategies in the industry,"
institutional investors are raising the bar for manager selection. To
be competitive, hedge fund firms should focus on articulating a
differentiated investment approach, a clear process, and proof that
heir edge can be sustainable.
-- Adaptability. Roundtable participants noted that the combination of
converging investment structures, shifting investor demands, and
challenging market conditions are causing hedge fund managers to
rethink their business models and develop multi-faceted solutions that
package their capabilities most effectively.
-- Clear value added. Investors are increasingly concerned with how much
"true alpha" they are getting for the hedge fund fees they pay. While
most of the institutions surveyed are still planning to maintain or
modestly increase hedge fund allocations, only 38 percent reported
being satisfied with risk-adjusted hedge fund returns, down from 62
percent a year ago. Moreover, 6 in 10 of the institutions surveyed
believe it is possible to meet investment objectives without
allocating to hedge funds.
-- The right fit. Today's investors have complex needs and want hedge
funds to serve multiple objectives within an overall portfolio mix.
Poll results suggest that rather than "pitching products," fund
managers should use an interactive, problem-solving approach to match
their capabilities to investors' specific objectives. It also calls on
institutional investors and consultants to develop clear, focused
mandates based on realistic expectations.
-- Scale or sizzle. Size presents challenges and opportunities at either
end of the hedge fund scale. While large funds still attract the
majority of institutional assets, and have advantages in building
institutional-quality processes, their performance has collectively
lagged that of smaller funds. Meanwhile, while small funds may be
better equipped to offer competitive returns, emerging strategies, and
undiscovered investment talent, they often fail to pass the screens
consultants frequently employ when selecting managers.
-- Business and marketing acumen. SEI's roundtable participants
resoundingly agreed that running a sustainable hedge fund business is
as difficult as achieving strong investment performance. Notably,
participants also felt that asset growth often depends less on
investment performance than on effective marketing and sound business
management. Managers need to make strategic use of outsourcing, adopt
marketing best practices, and invest more on compelling client
communication in order grow their businesses.
The study is published by the SEI Knowledge Partnership, which provides
ongoing business intelligence and guidance to SEI's investment
manager clients. To request the full paper, visit
About SEI's Investment Manager Services Division
Manager Services division provides comprehensive operational
outsourcing solutions to support investment managers globally across
a range of registered and unregistered fund structures, diverse
investment strategies and jurisdictions. With expertise covering
traditional and alternative investment vehicles, the division applies
customized operating services, industry-leading technologies, and
practical business and regulatory insights to each client's business
objectives. SEI's resources enable clients to meet the demands of the
marketplace and sharpen business strategies by focusing on their core
competencies. The division has been recently recognized by Buy-Side
Technology as "Best Outsourcing Provider to the Buy Side" and "Best
Fund Administrator," by Hedge Funds World Middle East as "Best
Service Provider," by Global Investor as "Hedge Fund Administrator of
the Year," and by HFMWeek as "Most Innovative Fund Administrator
(Over $30B AUA)" in the U.S. and "Best Administrator - Technology
Provider" in Europe. For more information, visit www.seic.com/ims.
SEI (NASDAQ: SEIC) is a leading global provider of
investment processing, fund processing, and investment management
business outsourcing solutions that help corporations, financial
institutions, financial advisors, and ultra-high-net-worth families
create and manage wealth. As of December 31, 2012, through its
subsidiaries and partnerships in which the com
pany has a significant
interest, SEI manages or administers $458 billion in mutual fund and
pooled or separately managed assets, including $201 billion in assets
under management and $257 billion in client assets under
administration. For more information, visit www.seic.com.
About Minard Capital
Founded in 2011 by Rachel S.L. Minard, Minard
Capital LLC is an independent, global marketing strategy firm
headquartered in San Francisco. The firm is the first outsourced
marketing consulting firm dedicated to providing the marketing
strategy, investor introductions and targeted sales process necessary
for alternative investment firms to win and retain global
institutional mandates. It is fee-for-service consultancy dedicated
to delivering more efficient and effective marketing and branding
tactics to raise a firm's assets, brand profile and sales efficiency.
For more information, please visit www.minardcapital.com.
+1 215-564-3200 x 110
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