Fund raising woes for alternatives

March 10, 2010 | By Jim Kim

There are some nuanced views when it comes to fund raising by private equity firms and hedge funds (hedge fund news). But most would agree that as a whole investors have wrested away a lot of power. Reuters puts it in perspective: Investors pulled a net $330 billion from hedge funds in the 12 months leading to June 2009. In the fourth quarter, inflows totaled just under $14 billion, despite stronger returns.

Meanwhile, private equity fundraising hit a five-year low last year, despite the prospect of better returns ahead. The broad themes here are well known. More investors would like managed accounts. They want a reduced management fee. They want negotiated rates. They want compliance assurances. They want third-party administrators. And so on.

All this would appear to favor the large companies with long track records, which can actually afford this stuff. This may create an even more exclusive top tier who can still get away with abusing clients but only if they can back it up with performance.

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