Hedge fund survey reveals managers either a) fulfilling mandate, or b) dreaming in Technicolor (check one)

16 April 2008

A new survey shows that hedge fund managers are negative on the U.S. economy, yet positive on the prospects for the hedge fund industry in 2008 (see press release).  The poll of around 300 “senior partners” can be interpreted in two different ways.  Either hedge funds are inherently optimistic and simply refuse to acknowledge the coming apocalypse for their industry, or hedge funds are proving their mettle by being equally as comfortable in falling markets as they are in rising ones.   

The accounting firm Rothstein Kass found that 90% of senior partners thought hedge funds would pull in more assets this year and three quarters felt that there would be more fund launches this year than last year.  Pulling off this feat would require brand and marketing expertise according to 90% of respondents.

Apparently Rothstein Kass’ mailing list includes a lot of optimistic managers.  Last September, when the firm last polled this group, 50% of hedge funds felt that the (then recent) credit crisis was “positive” for their hedge fund.  Less than 20% felt the credit crisis was going to have a negative impact (see posting).

But there was one area of concern last fall that doesn’t seem to have gone away - in fact it has become even more pronounced: costs.  Seven months ago, less than 60% of respondents believed hedge funds would become “more costly to operate” in the coming year.  Now, 66% feel that way - mainly due to concerns about increasing labour costs.

Notwithstanding this concern, optimism abounds in Hedgistan.  Only time will tell if those expectations are accurate, thus proving the resiliency and flexibility of hedge funds, or inaccurate, proving that the “senior partners” are all in the (newly upgraded) marketing departments. 

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