Rothstein Kass Publishes Annual Survey Report on Hedge Fund Trends

"Hedge Fund Outlook" Indicates Increasing Optimism among Industry Professionals, with More Fund Launches, Fewer Closures Anticipated

Nearly 80 Percent of Respondents Expect Increased Regulation, Opinion Split on Timeframe for Enactment

Jul 06, 2010, 08:44 ET from Rothstein Kass

NEW YORK, July 6 /PRNewswire/ -- International professional services firm Rothstein Kass ( today released "2010 Hedge Fund Outlook: Back to the Future?" the company's fourth-annual report on hedge fund industry trends. The report features the findings of a survey of senior managers at 381 hedge fund firms conducted between February and April of 2010 for their views on topics including capital raising intent, operational issues, the current regulatory environment and personal philanthropy. Results suggest that the industry continues to steadily recover from the global market crisis that began in late 2008, as more than 82 percent of respondents predict that there will be more fund launches this year than in 2009. Conversely, fewer than 20 percent of survey participants believe that more funds will close this year than in 2009.

"While nearly 70 percent of hedge fund professionals we polled still expect 2010 to be a difficult year, there are signs that conditions continue to improve. However, it is clear that the crisis has had a profound impact on the sector and its practices. Stung by fundamental misunderstandings regarding the nature and objectives of hedge fund capital pools, the community has responded by taking steps to offer greater transparency and enhance educational initiatives," said Howard Altman, Co-CEO and Co-Managing Principal of Rothstein Kass. "Though more than 73 percent of those polled agreed that the pace of redemptions will continue to slow this year, the industry continues to absorb lessons from a period of intense demand for liquidity. For many funds, a wave of redemption requests served as a reminder of the importance of attracting aligned investors with objectives and risk tolerances that are consistent with those of the fund."

"2010 Hedge Fund Outlook: Back to the Future?" also found that more than 67 percent of hedge funds surveyed plan to raise additional investment capital this year. Important sources of new capital include:


Under $500M


Weighted average

Institutional investors




High-net-worth investors




Family offices




Private equity firms




"Examination of the likely sources of capital points to the continued institutionalization of the hedge fund business, with larger established funds more likely to attract assets from pensions, endowments and benefit plans drawn by the sector's track record of delivering superior, long-term results. High-net worth individuals and families seem to be gravitating toward the family office model when considering allocations to alternative investments, recognizing the advantages of pursuing alternative investments as a component of an overarching wealth management strategy," said Mr. Altman. "In addition, the slower pace of redemptions has alleviated immediate liquidity concerns and restored fund stability, allowing funds to devote more substantial resources to core portfolio management activities and to evaluating operational best practices."

Research for "2010 Hedge Fund Outlook: Back to the Future?" was conducted by Russ Alan Prince, a leading authority and counselor on private wealth, and Hannah Shaw Grove, a widely recognized expert on behaviors and finances of wealthy individuals. Respondents included portfolio managers, research directors, chief operating officers, chief financial officers and other executives. Participating firms were segmented by assets under management, with approximately 77 percent reporting assets under management under $500 million and roughly 23 percent reporting assets under management in excess of $500 million. Insight into statistical findings was provided by the Principals and professionals of the Rothstein Kass Financial Services, Commercial Services and Family Office Groups, as well as the Financial Services Advisory practice. Among notable findings:

  • Nearly 70 percent of survey participants indicated that hedge fund launches in 2010 will be smaller than before the credit crisis
  • Approximately 71 percent of hedge funds expect hedge funds launching in 2010 to be more reliant on seed capital
  • 80 percent of firms surveyed indicated that hedge funds will use significantly less leverage than prior to the crisis
  • Roughly 58 percent of respondents anticipate downward pressure on hedge fund fees
  • Nearly 77 percent of survey participants expect there will be increased regulation of hedge funds
  • 47 percent expect the bulk of regulatory changes to take effect this year, with 52 percent indicating that the changes are more likely to take place in 2011.

"Since the credit crisis began, there has been almost universal agreement among hedge fund managers that the industry would be subject to greater regulation. Our latest research suggests that there is still strong consensus. The uncertainty regarding the current legislative agenda is reflected in the even split regarding the timeframe for enactment," said Mr. Altman. "Whatever the outcome, regulators are likely to keep a closer watch on the industry and its practices, since a growing number of Americans have exposure to alternative products directly or indirectly through their pension and benefits plans. This again highlights the need for more effective industry advocacy and educational efforts that raise awareness of the benefits and risks associated with alternative investment allocations."

About Rothstein Kass:

Rothstein Kass is a premier professional services firm that has served privately held and publicly traded companies, individuals, and families for more than 50 years. Rothstein Kass is consistently ranked as a top CPA firm to the alternative investment industry in independent, third-party surveys. The Rothstein Kass Financial Services Group provides services to many high-profile and respected clients including hedge funds, fund of funds, private equity and venture capital funds.

The Rothstein Kass Family Office Group offers a wide range of financial, wealth planning and lifestyle management services to family offices and high-net-worth individuals. Composed of seasoned financial professionals and certified public accountants, the Family Office Group applies proven expertise with the utmost discretion and attention. Clients include business owners and members of the financial services, entertainment and sports communities.

The Rothstein Kass Commercial Services Group provides essential and complementary professional services to public and privately-held businesses, private equity and venture capital funds and their portfolio companies, broker-dealers and registered investment advisors, as well as to high-net-worth individuals and families.

The Rothstein Kass Financial Advisory Services practice is a division of the firm's Advisory Services Group that provides independent and objective guidance on matters spanning all aspects of the client relationship. The Financial Advisory Service practice advises Rothstein Kass clients in tactical service areas including strategy, operations, technology, compliance and risk. Strategic services include infrastructure and operations, service provider evaluation, and organizational advisory. Clients include hedge fund and private equity fund managers, institutional investors, mutual funds, broker / dealers and insurance companies.

About the Authors:

Russ Alan Prince is the world's leading authority on private wealth, the author of 40 books on the topic, and a highly-sought counselor to families with significant global resources, and their advisors. He is co-author of Fortune's Fortress: A Primer on Wealth Preservation for Hedge Fund Professionals.

Hannah Shaw Grove is a widely recognized author, columnist, speaker and an expert on the mindset, behaviors, concerns, preferences and finances of high-net-worth individuals. She is co-author of Inside the Family Office: Managing the Fortunes of the Exceptionally Wealthy.

SOURCE Rothstein Kass