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Hedge Fund Managers and Investors Disagree on Several Points, Ernst & Young Reports

By Michael Foster, Big4.com Blogger

Hedge fund managers and investors are finding less common ground on several issues, such as managerial compensation, the effectiveness of regulation, and investment redemption criteria.

For instance, hedge fund investors were very pessimistic about the results of increased regulation, with 34 per cent saying regulation would result in increased investment in compliance, compared to just 2 per cent of investors agreeing to the same point. On the other hand, 20 per cent of investors said that greater regulation would improve transparency. However, none of the hedge fund managers surveyed said that greater regulation would improve transparency and 22 per cent said that more regulation would make no significant changes at all.

Most strikingly, just 2 per cent of investors said that current regulations would prevent the next financial crisis, whereas 85 per cent believed that current regulations were good enough.

According to Ernst & Young, the survey suggests that “investor demand is by no means satiated although the investors we spoke to broadly intend to maintain their allocations to hedge funds.” The survey also noted that several investors were intending to allocate more funds to start-up funds. “Both these trends attest to a thriving and continually reinvigorating industry,” the report concluded, despite the strongly divergent opinions on several issues between investors and fund managers.

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