State Street Research Reveals Hedge Funds are Optimistic about Future
January 26 2015 - 3:14PM
Business Wire
A new global survey* commissioned by State Street (NYSE: STT)
amongst 235 hedge fund professionals reveals strong optimism within
the industry. The findings show that respondents (55 percent)
expect pension funds to increase their exposure to hedge fund
strategies over the next five years. This figure increased to 63
percent when the question was asked more broadly about
institutional investors increasing their exposure to hedge funds in
the next five years.
Of the 55 percent of hedge fund professionals who expect pension
funds to increase their allocation, 53 percent believe the main
driver of this is the performance challenges facing investors’
portfolios. 35 percent believe it will be a growing focus on
portfolio diversification and 13 percent who think it will be
improved terms offered by hedge funds.
However, to really capitalise on the growing appetite for hedge
fund strategies, nine out of ten industry professionals interviewed
believe hedge funds will be required to more clearly demonstrate
their value to prospective investors.
Maria Cantillon, global head alternative investment solutions
sales at State Street said, “Despite the challenges facing the
hedge fund industry, our findings show that many working in the
sector are optimistic about its future prospects. This is being
fuelled by challenges facing asset owners as they search for better
returns and greater diversification. The hedge fund industry is
maturing and becoming more transparent and competitive.”
In terms of how hedge fund professionals see their own firms
changing over the next five years, 60 percent expect to broaden the
range of investment strategies they manage; 37 percent anticipate
that they will expand abroad and one in ten expects to acquire
another company.
According to the survey, regulation will continue to have a
significant impact on hedge fund managers. However, the full impact
of Basel III is yet to be determined, with 29 percent of
respondents believing that it will significantly increase their
firm’s cost of financing, compared to 42 percent saying it wouldn’t
and the remainder (29 percent) saying they don’t know. The findings
also suggest growing competition from alternative mutual funds.
Half of those interviewed believe that over the next five years,
they will seize market share from traditional hedge fund
strategies.
In a recently launched YouTube video series, State Street offers
perspective on the outlook for hedge funds in 2015. To view the
videos, click here.
*In October 2014, State Street engaged Citigate Dewe Rogerson to
conduct a global survey of hedge funds, asking them to make a set
of five-year predictions for the industry. Using the Preqin
database, the survey received 235 responses.
About State Street
State Street Corporation (NYSE: STT) is one of the world's
leading provider of financial services to institutional investors
including investment servicing, investment management and
investment research and trading. With $28.19 trillion in assets
under custody and administration and $2.45 trillion* in assets
under management as of December 31, 2014, State Street operates in
more than 100 geographic markets worldwide, including the US,
Canada, Europe, the Middle East and Asia. For more information,
visit State Street’s web site at www.statestreet.com.
* Assets under management include the assets of the SPDR® Gold
ETF (approximately $27.3 billion as of December 31, 2014), for
which State Street Global Markets, LLC, an affiliate of SSgA,
serves as the distribution agent.
State Street CorporationAnne McNally, +1
617-664-8576www.statestreet.com@StateStreet
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