Tuesday, April 14, 2009
We Expect Hedge Fund Revenues to Plummet to $30.4 Billion in 2009
The topical study from the April 2009 issue of The Hedge Fund Flow Report. Gain insight into industry trends and hedge fund asset flows before you make your next important decision.
With the hedge fund boom over, we are measuring the impact of the bust. . .
With the hedge fund boom over, we are measuring the impact of the bust. . .
Hedge funds are caught in a revenue trap with no easy way out. Hedge funds will have to rely on organic growth rather than flows to grow their asset base. They will have to dramatically cut costs to make up for the fact that revenues will stay 50% off their peak for many years. Home builders in Connecticut and high-end restaurants in Mayfair should brace for tough times.
Performance related revenues drop to $21.1 billion in 2008 from $55.8 billion in 2007. Performance fees fell to a record low of 0.1% of hedge fund assets in Q3 2008.
Performance fee models must take into account "high-water mark" provisions, which require many funds to return to a previous peak before collecting a performance fee. Hence, performance fees are not a linear function of assets under management and returns. They depend on the path of prior returns and the distributions of current returns. Theoretically, performance related revenue can remain strong even in periods of bad returns. . .
Performance related revenues drop to $21.1 billion in 2008 from $55.8 billion in 2007. Performance fees fell to a record low of 0.1% of hedge fund assets in Q3 2008.
Performance fee models must take into account "high-water mark" provisions, which require many funds to return to a previous peak before collecting a performance fee. Hence, performance fees are not a linear function of assets under management and returns. They depend on the path of prior returns and the distributions of current returns. Theoretically, performance related revenue can remain strong even in periods of bad returns. . .
Accredited investors can read the entire article for free.
From the April 2009 issue of The Hedge Fund Flow Report. The Hedge Fund Flow Report combines the accuracy of the BarclayHedge database with the analytical insight of TrimTabs Investment Research. The report is generated by TrimTabs Investment Research using the most current data on thousands of hedge funds. An annual subscription includes 12 monthly updates as well as a spreadsheet containing historical flow aggregates by category.
To download a free sample of the entire TrimTabs Hedge Fund Flow Report, simply fill out this short request form.
Labels: CTA, Hedge Fund Flow Topical Study, hedge funds
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