KPMG_hedge_fund_cost_survey_1__1_

KPMG_hedge_fund_cost_survey_1__1_ - FINANCIAL ADVISORY...

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FINANCIAL ADVISORY SERVICES Hedge fund cost survey September 2008 ADVISORY
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1 Hedge fund cost survey Background The Hedge Fund industry is going through a period of significant change, with three main factors helping to shape the future: z Challenging financial markets following the “credit crunch”. Total hedge fund industry returns were negative in quarter one 2008, for the first time since 2004 and several large hedge funds closed down or defaulted in 2007 and 2008 z Self-regulatory best practice and governance standards proposed by various bodies, including the HFWG and AIMA in the UK and the PWG in the US, in an attempt to head-off direct regulatory intervention z Increased interest in outsourcing and the expanding suite of products offered by Service Providers, Prime Brokers and Administrators This survey explores the structure of the cost base for small to medium- sized Hedge Fund managers in the current market, looks at managers’ appetite for outsourcing and also where costs are expected to change in future. Survey approach The participants are London based and have USD13 billion in total assets under management, with a significant proportion under USD1billion. 20 Hedge Fund managers took part in the survey, which included hour long interviews and completion of a questionnaire. Costs are often categorised in different manners, which poses challenges in obtaining a meaningful comparison of costs. Therefore an interview approach was adopted to conduct this survey, supported by a structured questionnaire. This allowed KPMG to probe behind the figures, ensure ‘like for like’ comparisons were obtained and explore emerging trends. This survey is sponsored by PCE Investors Limited (PCE), who provide a range of business support services to Hedge Funds of varying size. PCE can perform operations, risk management, marketing, compliance and an IT infrastructure, as well as providing physical amenities if necessary. They can also provide independent FSA fund vehicles under the PCE regulatory umbrella. PCE currently have clients with c. USD1.5 billion under management.
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2 Hedge fund cost survey Executive summary Investors exert increasing influence on costs … in particular their desire for improved governance standards and compliance. Where over 70% of a manager's clients are institutional investors, the proportion spent on corporate control increases significantly. Eight out of ten of those polled consider that investors are placing more emphasis on the back and middle office. Half of managers are taking steps to reduce costs … either in premises, staff or front office systems. The degree of outsourcing is high and appetite for and extent of outsourcing is increasing 30% of managers are looking to outsource additional services. Segregation of duties continues to
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This note was uploaded on 04/09/2010 for the course NBA 5450 taught by Professor Richardmarin during the Fall '09 term at Cornell University (Engineering School).

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KPMG_hedge_fund_cost_survey_1__1_ - FINANCIAL ADVISORY...

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