Lawrence Obertelli
Head of EMEA Prime Service Sales
The AIMA Marex Emerging Managers Survey 2024
In this Q&A, Lawrence Obertelli, Head of EMEA Prime Service Sales at Marex and co-author of the AIMA and Marex Emerging Managers Survey, shares insights into the latest report. We explore its origins, the context of the data and key findings as we shed light on how emerging hedge fund managers are navigating today’s complex financial landscape.
1. What was the initial idea behind this research series, and what sets it apart?
This research was originally designed to fill a crucial gap in understanding emerging hedge fund managers – a segment often overlooked in broader financial research. There was clearly a need for detailed, ongoing analysis of funds managing up to $500m.
Unlike other hedge fund reports, emerging players have been the sole focus of this work, providing unique insights into the operational challenges they face and the interest investors demonstrate in this segment of the alternative investment space. It’s this focus and trend data that make it a standout resource in the industry.
2. Explain the theme of this year’s report.
This year’s theme, “Standing Strong,” highlights how emerging hedge fund managers are navigating a challenging environment. They’re showing resilience by balancing various factors, such as competitive fee models and lean operating practices, which helps them stay effective despite economic and market pressures.
3. How did the research methodology shape the report’s findings?
Our methodology involves surveys of hedge fund managers and investors (171 and 60 respectively in this latest edition), as well as focus groups to validate the findings. This offers a broad view of industry trends and detailed insights into operational practices and investor preferences.
By including data from funds managing between $500m and $1bn, we provide comparative insights that highlight how trends develop across different market segments.
4. What are the key highlights regarding hedge fund operations?
Key highlights include the sustained impact of Covid-era operational efficiencies and practices. Even with rising expenses, emerging hedge funds have kept operating and breakeven costs below pre-pandemic levels. The report also underscores the significance of outsourcing, which allows managers to control costs while leveraging specialist expertise and scalability.
Overall, emerging managers are keenly focused on operational efficiency to tackle new financial and investor challenges.
5. How do fee models influence investor attraction to emerging funds?
Competitive fee structures are crucial for attracting investors to emerging hedge funds. The report reveals that managers are offering fees significantly lower than the traditional 2&20 model, making their funds more attractive. This trend aligns with a broader industry move towards greater alignment of interests.
6. What new insights does the report offer about investor attitudes?
The report highlights a positive shift in investor preferences, with an increased willingness to allocate funds to new hedge managers. Notably, 48% of investors are now open to considering managers with less than a year of track record based on strong past performance. Investors are relying more on personal networks and prime broker introductions to discover new managers.
Additionally, there’s growing acceptance of smaller funds, with two-thirds of investors open to those with less than $100m in AUM, indicating a broader exploration of opportunities.
7. What challenges regarding fundraising and investment were identified?
The report identifies challenges such as an increased average time to secure new investments, from just over six months to eight months, reflecting a more rigorous due diligence process and heightened demands for transparency.
Funds must navigate these challenges by being more strategic in their communication and operational practices, while also managing cost containment pressures.
8. What do the authors hope readers will take away from the report?
We hope readers gain a nuanced understanding of the resilience and adaptability of emerging hedge fund managers. The report’s time series analysis reveals long-term trends, while cross-sectional analysis provides detailed insights into variations across fund types, sizes and regions.
This comprehensive view aims to help both fund managers and investors make informed decisions and adapt to the evolving market.
9. What trends stand out compared to previous editions?
Building on previous editions, this report continues to emphasise operational efficiency and competitive fee models. Notably the report delved into investor requirements around liquidity terms for the first time.
It also saw an increased openness to smaller fund sizes. Trends such as longer times to secure investments and varying interest in different fund strategies reflect evolving investor preferences and market conditions.
10. What future research directions are anticipated following this report?
Future research will extend the analysis over the long term, potentially comparing data across a 10-year period from the first report in 2017. We’ll delve deeper into new areas highlighted in this report, such as the impact of ESG and liquidity terms, to develop a more comprehensive understanding of how these factors influence the hedge fund landscape over time.
Conclusion
The AIMA & Marex Emerging Managers Report offers valuable insights into the resilience and adaptability of emerging hedge fund managers.
By focusing on operational efficiency, evolving fee structures and understanding ESG and liquidity considerations, the report provides a comprehensive view of the current landscape and future direction for both fund managers and investors.
For more information, download the full report or click here to email Lawrence.