Hedge funds must end enigmatic mentality
Hedge fund managers have been called on to raise their industry profile and dispel the perception of secrecy that surrounds them if they intend to move into and remain in the psyche of consumers and investors.
According to Investment and Financial Services Association (IFSA) chief executive Richard Gilbert, investor perception is everything.
“An industry is only as good as it’s perceived, which is done through branding and through the media, so if it’s not perceived then it will struggle to grow,” he says.
“There is material there on its [the hedge fund industry] size, its functioning and its costs and returns but it’s secret. I don’t think there’s an intentional veil of secrecy, I just think the industry can do more to promote itself.”
Gilbert says hedge funds need to enter the funds under management [FUM] game and become listed in league tables.
“This means some managers may have to disclose an FUM of $2 million and maybe foot the table, but this will be positive for the sector as a whole in the long-term,” he says.
Alternative Investment Management Association (AIMA) chair Damien Hatfield agrees with Gilbert, but says the hedge fund industry is hamstrung due to its reliance on rating agencies.
“We agree 100 per cent but the challenge that we’ve got is a catch-22 because one of the ratings providers on hedge funds recently told us they’re not going to do it at all. They said they don’t have the resources, while others have said, ‘look we’re studying hedge funds’, but none of them have come out and designated space for league tables,” Hatfield says.
According to Hatfield, most of the reporting to date is through offshore database service providers such as Hedge Fund Research or TASS Tremont.
“It’s not as if we’ve been sitting down doing nothing as we have been actively meeting with all rating agencies and league table providers. I don’t think it’s a size issue, it’s more of a demand issue, as they [research houses] tend to react to demand similar to when a platform lists a manager as a result of planners demanding a manager be added to its line-up,” Hatfield says.
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