Despite the dismal numbers this year, hedge fund managers have performed relatively better than their equity manager and asset allocation advisor counterparts. But with unprecedented scrutiny from the media and politicians, the hedge fund industry as a whole will have to adjust to radical changes, according to an article in Hedgeworld.
The hedge fund industry will have to change the way it allocates and raises funds, with much less leverage and fewer players. Investors will no longer touch strategies with illiquid and opaque assets, such as asset backed securities. The inefficient fund of funds model may be obsolete as well, with investors no longer tolerating the higher fees charged by fund of funds registered in obscure locations. Many funds of funds will likely close down or merge.
The article goes on to say that there may be a greater demand for funds that offer dedicated managed accounts that invest in single managers, such as foreign exchange.