Fundraising Tough on Hedge Funds

Today’s market poses a difficult fund raising environment across all hedge funds.

Executive search firm, Russell Reynolds Associates (RRA) recently hosted an industry event, examining the current state of play for hedge funds.

Hedge funds are seeing a continued trend towards more capital inflows as a whole; estimated at $2.25 trillion by year-end, according to the firm. Ninety percent of flows went to managers with more than 5 billion in assets.

“It’s arguably, the most challenging fund raising environment,” said Lynn Tidd, managing director at Russell Reynolds Associates. Tidd specializes in the recruitment space for hedge funds, private equity funds and other alternative firms. “People need to have a different approach today, to get above the noise. Whether you sit in the front office, in an investment role, or in a back office role, you will interface investors.”

Tidd noted that she recruits for the larger, established hedge fund community.

“Investors are encouraged today to invest broadly, not just within hedge funds. The L.P. community is a lot more cautious about where they place alternative strategies,” she said. “It might be a year or two before allocations come, whereas, in the past, it might have been three to six months.”

The next generations of hedge fund managers are also coming to market with the help of the hedge fund seeding community. Nearly 300 new hedge funds launched in the first of quarter of 2011; launch rate of 3.3 percent, according to a statement from the RRA event.

“Hedge funds will succeed if they produce more than alpha, and run like a true business…it’s the professionalization and institutionalization process,” Tidd told Markets Media. “You need much more than operational capital to launch; it’s more than just traders, and portfolio managers that contribute to the business structure.”

Apart from attracting seeders, hedge funds today are still employing traditional methods of capital raising, noted Tidd. Such methods include the use of “friends and family” money to build track records, and eventually branching out to three to five institutions.

“My take away from the trends that came out of the event is around succession planning,” Tidd said. “It’s a question of if these hedge founders have passed on a good legacy to the next generation of leadership.”

The “next generation” of hedge fund leader will also be across the gamut, versus past eras of hedge fund management—which largely came from proprietary traders smoked out by financial regulation on banks.

Of the trend to go from prop trader to hedge fund manager, Tidd remarked the phenomenon is “played out. There’s no one left considering regulatory schemes have already forced people to jump ship.”

2015 Outlook: Pete Sinisgalli, Eze Software Group

What were the major themes of your business in 2014?

Pete Sinisgalli,
Eze Software Group

Investing in both our business and technology was a major theme in 2014. We focused on expanding our client service capability and research and development. R&D spending in particular has increased by more than 25% since the formation of Eze Software Group in 2013. This investment accelerated an exciting product roadmap that broadened the feature set of our core products (Eze OMS, RealTick EMS, and Tradar PMS), enhanced integration across the product suite, and advanced our strategy for bringing our offerings to the cloud. What is especially rewarding is that we are already seeing the impact of this investment as evidenced by the dramatic increase in the number of clients leveraging multiple Eze Software products across the investment lifecycle. 2014 was a tremendous year for Eze Software Group, our employees, our partners, and our clients.

What are your expectations for 2015?

In 2015 we will continue to enhance our core product lines to ensure our clients have industry-leading investment technology. At the same time we will execute our cloud strategy by continuing to build cloud-based versions of our capabilities in an iterative, phased manner. This is a multi-year effort, but we’ll continue to release new capabilities throughout 2015. We also have some exciting new integrations and innovative technology to share with our clients including the recent integration of our EMS and OMS products. We also recognize our customer service is a key differentiator for us, and we’re making investments in the coming year to ensure we continue to deliver the best customer service in the business.

Global Markets Summit New York

Global Markets Summit New York
Markets Media is pleased to present its Main Event: Global Markets Summit, New York to be held on Thursday, November 20, 2014.

The summit will convene senior executives from institutional asset owners, investment managers, sell-side banks, exchanges, alternative trading systems and technology and software providers.The summit will convene senior executives from institutional investors, banks, exchanges, alternative trading systems and technology and software providers.

Topics debated will include the outlook for global economic growth amid still-accomodative monetary policy; regulatory initiatives and their present and future impact on markets; updates on fixed-income and equity trading, including the ‘futurization’ of the OTC space and the evolution of high-speed trading; technology of tomorrow; alternative investments; equity execution; wealth management; challenges to emerging managers and more.

Markets Media is pleased to announce a new format at this year’s event, featuring The Debates, The Breakfast Sessions and (back by popular demand) The Cocktail Rounds!

I welcome your thoughts and ideas as together we navigate this intricate and dynamic financial landscape.