Hedge Fund Managers Optimistic for 2011

Hedge fund managers are more confident that opportunities will improve in 2011 as the global economy recovers, according to a new survey released by the accounting and audit firm, Rothstein Kass.

Managers expect more funds to be chasing after the institutional and pension fund money that is already flowing into hedge funds at record levels.

“We see an optimism that is a growing theme among the survey participants,” said Howard Altman, Rothstein Kass’ co-CEO, in an interview with Reuters. “At the same time the surge in capital from institutions and since late 2010 the emergence of seed capital is also an important theme.”

More than half of the hedge fund managers surveyed said they expect to raise more capital this year, with 71 percent saying it would come from institutions. That contrasts with five years ago, when Rothstein Kass first began their poll, and only 20 percent of managers felt that institutional investors would be a major source of new capital.

The influx of institutional capital is a double-edged sword, however. While fund managers appreciate the stability these large investments bring, it also leaves them open to increased pressure to trim fees. According to the survey, a majority of hedge fund managers with less than $500 million in AUM would be willing to cut fees in return for allocations of $50 million or more. While the larger funds would have to receive bigger allocations in order to consider concessions.

More than half of hedge fund managers surveyed also said they expect the SEC to demand greater transparency, particularly as to which stocks they are shorting. High-frequency traders can expect more oversight into how they are borrowing money for investment purposes, as well.

Overall, the hedge fund industry manages $2.02 trillion right now, according to data from Hedge Fund Research. You can see a copy of the full Rothstein Kass report at their website.

What about you? Are you feeling more optimistic about your hedge fund job or your firm’s prospects for success in 2011? Add your comments below.

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