Changing investor demographics, pressure to boost investment results while also cutting fees, increased competition and the ramifications of potential tax reform will drive significant changes in the hedge fund industry over the next few years. Following are overviews of several key trends that will present new opportunities and new challenges.
Success for any hedge fund starts by growing assets under management (AUM), and that means finding new investors. Traditionally, funds focused on institutional investors and a small pool of high net worth households. The recent explosion in households with a net worth of more than $5 million, however, provides a large new pool of potential investment capital, but also raises new challenges. “This significant increase in investment capital available from individual investors provides opportunity for hedge funds focused on the individual market and for funds looking to diversify beyond institutional investors,” says Michael Patanella, Audit partner and national leader of Grant Thornton’s Asset Management practice, “but it also raises new marketing, operational and regulatory challenges.”
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