Hedge Fund Product Wave Set for 2016

Almost half of all global hedge fund and liquid alternative managers are set to launch new products in 2016, research has shown, as funds claim rising assets indicate increased investor appetite. 

Some 44% of hedge fund firms told PwC and the Alternative Investment Management Association (AIMA) that they planned to market new funds, while a third of US and half of UK liquid alternative managers said the same.

“Identifying and targeting sales channels and targets was not systematic at many hedge funds until recently.”

“Going forward, considerable thought will be applied to each and every fund launch,” a report accompanying a survey by PwC and AIMA said. “As investors become more demanding and require greater customization, the research and business development activity before a fund launch will intensify.”

Every product must be thoroughly vetted for potential performance, for attractiveness to the market and for potential profitability, the report continued.

“Identifying and targeting sales channels and targets was not systematic at many hedge funds until recently,” the report said. “Today, many have sophisticated processes to decide which investor channel or channels, and which markets and regulatory regimes, they want to target.”

PwC and AIMA found that expected sales targets were different around the world, with defined benefit pensions expected to take up the bulk of new products in the US next year. In continental Europe, high net worth individuals were the main target. In the UK, hedge funds-of-funds were expected to soak up much of the new products on offer.

The reason behind these new product launches has been a rise in assets across the industry, according to the survey.

More than half (61%) of managers reported rising assets in their funds, while upwards of 80% of firms offering liquid alternative products said the same.

“The alternatives industry continues to grow and evolve, a sign that it is responding positively to changed investor demands as well as regulatory reforms,” said Jack Inglis, AIMA CEO. “The industry, having begun the process of institutionalization prior to the global financial crisis, is now maturing rapidly in order to manage a variety of distribution opportunities.”

This month, a survey of institutional investors around the world reported that 41% would increase their hedge fund holdings in the coming year.

Related: Hacking a Hedge Fund