Forbes recently referenced a survey of 141 senior investment professionals at single-family offices, who are presently investing in hedge funds, about 85% expect the hedge fund industry to continue to bifurcate into larger hedge funds, smaller boutique hedge funds, and likely oblivion for the hedge funds in the middle. Interesting.
The larger more well known hedge funds will look more and more like traditional asset management companies. These hedge funds will probably have multiple funds available to investors in different share classes. At the same time, smaller managers may have the edge by providing outsized returns and the ability to stay nimble.
Nearly nine out of ten of the senior investment professionals surveyed are looking for smaller boutique hedge funds to invest in. All 141 senior investment professionals at the single-family offices surveyed negotiate both terms and fees with just about all their vendors including hedge funds. Understandable - however the old adage of ‘performance pays’ still rings true in the hedge fund world.
Angelo Robles, founder and CEO of the well known and established Family Office Association had this to say: "Many single-family offices are committed to hedge funds and are going to continue investing in them. This is especially the case with single-family office consortiums that, when they do invest, can put tens of millions if not hundreds of millions of dollars into a single hedge fund. However, most of the time these single-family offices are going to negotiate terms and fees. For many of them, the traditional '2 & 20' arrangement is pretty much dead."