Press Release: The Next Generation of Hedge Fund Managers are ‘Emerging Stronger’
Published: 30 May 2022
AIMA report, in partnership with Cowen, reveals the next generation of hedge fund managers are emerging from recent economic turmoil more resilient and efficient
30 May 2022 - The Alternative Investment Management Association (AIMA), in partnership with Cowen, has today published a new report presenting an analysis of the global emerging hedge fund manager community.
The report, ‘Emerging Stronger: The Next Generation Manager Survey 2022’ is informed by two surveys: one of emerging managers running up to US$500 million in assets under management (AuM), and another of the investors that allocate to them.
- The average breakeven1 has fallen by 25% from its 2017 level of US$86 million in 2017 to $64 million
- Two-thirds of investors will consider allocating to hedge funds with less than $100 million AuM
- The average time to close on new investments for emerging managers is taking 6.3 months on average and even less, 5.6 months, for managers of sub-$100m funds
The research revealed a community of hedge fund managers that have weathered the recent macro-economic turmoil and have emerged hardier and more resilient than before.
This has been achieved by slashing costs where possible (for example, in real estate and travel and headcount), sacrificing salaries, and greater use of regulatory platforms.
For a long time, it has been recognised that fund managers must have a track record of at least three years and also boast an AuM of over US$100 million before most investors will consider them.
On both these counts, investors surveyed dismissed these views, with data showing that the vast majority would consider a fund that was less than three years old and had under US$100 million AuM.
Moreover, investors appear more willing to engage with managers at an earlier stage in their lifecycle and are taking less time to agree to new investments.
Jack Seibald, Managing Director and Global Co-Head of Prime Brokerage and Outsourced Trading at Cowen commented: “This research provides evidence of a changing landscape for both managers and investors. For funds with up to $500m AuM, the impact of the pandemic has resulted in leaner, more efficient and robust operations, with greater opportunities from investors than at any time in recent memory. The steps these funds have taken to safeguard their businesses during the pandemic stand them in good stead moving forwards. These firms have largely insulated their businesses from recession and have the resilience to withstand the predicted economic turmoil ahead.”
Tom Kehoe, Managing Director, Global Head of Research and Communications at AIMA, said: “It’s heartening to see that despite the troubles of COVID, the next generation of fund managers are emerging leaner and more business savvy. Through this research, we have found that firms can build strong and thriving businesses on much less than was previously thought.
Meanwhile, the stability of the fee levels since 2017 offers an optimistic health check on the industry and suggests investors continue to see value in allocating to emerging managers.”
This report provides an update to a 2017 report by AIMA which looked at the same demographic. Key areas of focus in the surveys included fees charged, average headcount, costs (including the estimated breakeven costs) and the average length of time to close on a new investment, among other areas.
The data was also interrogated by groups of emerging managers in APAC, North America and EMEA to add context to the numbers.
The manager survey had 149 respondents with an estimated aggregate AuM of US$16.7 billion and an average AuM per manager of $112 million. This research was carried out in Q4 2021.
The investor survey had 26 respondents who together allocated around US$50 billion to hedge funds. Just under half (48%) of investors surveyed allocate more than US$1 billion to hedge funds.
For a copy of the report or for further information, please visit https://www.aima.org/
1 Breakeven refers to the threshold of total costs of running the firm that must be met before it begins to turn a profit
The Alternative Investment Management Association (AIMA) is the global representative of the alternative investment industry, with around 2,100 corporate members in over 60 countries. AIMA’s fund manager members collectively manage more than $2.5 trillion in hedge fund and private credit assets.
AIMA draws upon the expertise and diversity of its membership to provide leadership in industry initiatives such as advocacy, policy and regulatory engagement, educational programmes and sound practice guides.
AIMA works to raise media and public awareness of the value of the industry. AIMA is committed to developing skills and education standards and is a co-founder of the Chartered Alternative Investment Analyst designation (CAIA) – the first and only specialised educational standard for alternative investment specialists. AIMA is governed by its Council (Board of Directors). For more details go to www.aima.org.
Cowen Inc. (“Cowen” or the “Company”) is a diversified financial services firm that provides investment banking, research sales and trading, prime brokerage, outsourced trading, global clearing and commission management services. Cowen also has an investment management division which offers actively managed alternative investment products. Founded in 1918, the company is headquartered in New York and has offices worldwide. Cowen Prime Brokerage is a full-service institutional offering that partners with emerging to established investment managers to help them build and grow their business. Its model is flexible and highly personalized, ensuring clients get the differentiated solutions they need as their business evolves. By partnering with Cowen, clients have access to its award-winning prime brokerage services, global trading desk, operational support, capital introduction and business consulting, backed by the institutional capabilities of a global investment bank. For further information, visit www.cowen.com
Press Contact for AIMA:
Associate Director, Research and Communications, AIMA