RJ and Makay

For the first time an annual report on hedge funds done by consulting firm Greenwich Associates for Ernst & Young is including the views of institutional investors along with the usual focus group of hedge funds. The study recorded the views and opinions of 104 hedge funds, representing US$585 billion in assets under management, and 53 institutional investors representing US$260 billion in assets under management, more than one-fourth of which are invested in hedge funds.  In the report, entitled Restoring the Balance, both the shared views and gaps in opinions between both groups were highlighted. Ratan Engineer, global leader of Ernst & Young’s Asset Management practice says: “We hope the views expressed in the report will stimulate constructive debate – not just between investors and hedge fund managers, but throughout the financial community.”

Over half the institutional investors feel they currently have more negotiating power, with over 40% saying they have pressured their hedge fund managers to lower management and incentive fees. A third of the Investors say they need more liquidity than before the economically pivotal month of September 2008, and 30% say the maximum lock-up and the maximum gate they will accept is diminished from what they were prior to the financial crisis.