Hedge fund managers more upbeat for 2011: survey
By Svea Herbst-Bayliss
BOSTON (Reuters) - Hedge fund managers are finally breathing a sigh of relief.
Newly confident that investment opportunities will improve in 2011 as the global economy recovers, more than half said they have a generally positive outlook for the industry, a survey from accounting and audit firm Rothstein Kass shows.
At the same time, however, managers expect more people to chase investment dollars as institutions like pension funds are ready to add a flood of money.
"We see an optimism that is a growing theme among the survey participants," Howard Altman, Rothstein Kass' co-CEO, said in an interview. "At the same time the surge in capital from institutions and since late 2010 the emergence of seed capital is also an important theme," he added.
Rothstein Kass surveyed 313 managers on the Internet in January and will release its findings on Wednesday. Reuters obtained a draft of the report.
The newfound optimism is underpinned by expectations that clients will leave their money placed with 80 percent of managers, and the pace of withdrawals will slow. Nearly three quarters of the managers also said they expect more newcomers to launch fund firms this year.
More than half of the managers said they expect to raise more capital this year. Some 71 percent of the respondents said that institutional managers are likely to provide the bulk of money.
"At this stage, institutional assets represent a substantial portion of hedge fund portfolios," Altman said, adding "Fund managers have come to appreciate the stability, long-term view and stream of investment capital institutional investors provide."
Five years ago when Rothstein Kass first put out this annual survey, only 20 percent of the managers thought that institutional investors would be a dominant source of capital.
Now a majority of managers who have less than $500 million in assets said they would be willing to consider cutting fees for allocations of $50 million or more. At larger hedge funds, the allocations would have to be significantly bigger to result in concessions, but managers are still thinking about it.
As hedge funds are being used more at pension funds and average Americans are tapping into these potentially high-flying portfolios, regulators will focus more attention on them, the surveyed managers said.
More than half of the managers said they expect the Securities and Exchange Commission to require managers to regularly say what stocks they are short, or are betting against -- a tool that has helped many hedge funds make money in all markets. Managers also expect regulators to look more carefully at high-frequency trading and how managers use borrowed money to help boost returns.
(Editing by Steve Orlofsky)