Partnerships between hedge funds and their investors are becoming more common.
More than three-quarters of managers and two-thirds of investors have entered into partnerships, finds a survey by the Alternative Investment Management Association (AIMA) and Barclays.
The survey finds five key elements of partnerships: access to expertise and resources, customized products and solutions, co-investment, product seeding and equity stakes. There are also a number of benefits to investors, including improved knowledge and understanding, better alignment of interest with managers and better value for money.
Both larger and smaller managers and hedge funds of all strategies were found to be striking partnerships. Benefits to managers included “stickier” or more loyal investors, support for new product development, cross-selling opportunities and the offer of investor references.
“What the survey shows is that managers are truly going the extra mile in terms of sharing knowledge and resources and providing customized products and services to their investor partners,” says Jack Inglis, AIMA’s CEO. “These partnerships are also providing further evidence of very high levels of satisfaction among investors in their hedge fund investments.”
The growth of partnerships represents an exciting new direction for the hedge fund industry as it continues to evolve, adds Lou Molinari, managing director, global head of capital solutions, with Barclays.
“Successfully building partnerships with investors can allow managers to grow their business while increasing the stability of their assets under management and cater to the specific needs of an increasingly sophisticated investor base,” he explains.
Investors surveyed manage a combined US$2 trillion in assets, of which approximately US$260 billion is allocated to hedge funds. They include pension funds, endowments, foundations, sovereign wealth funds and family offices globally. The managers surveyed manage approximately US$200 billion in assets.
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