EisnerAmper LLP & EisnerAmper Cayman attend GAIM Ops Cayman conference
Nicholas Tsafos and Peter Cogan, Audit Partners in EisnerAmper LLP and Directors of EisnerAmper Global, attended the Global Alternative Investment Management (“GAIM”) Ops Cayman conference on March 6-9 alongside Ben Leung, Managing Partner of EisnerAmper Cayman and Director of EisnerAmper Global.
GAIM was founded in 1994 and soon became the world’s largest international alternative investment event, known for its high intellectual content as well as the range, quality and quantity of the global investors and allocators it attracts. It has been held in Geneva, Monaco, Cannes, and Cayman.
GAIM is the annual global focal point for global investors to learn about the wider industry and the strategic debate within which alternatives operate, and secondly as an objective platform for the most interesting investment themes and best performing funds globally.
Peter, Nick and Ben were joined by other members of the EisnerAmper Cayman team to participate in interactive workshops and discussions.
GAIM Ops Cayman 2016 Poll Results
The results can be viewed below or a PDF version of the report can be downloaded here: GAIM 2016 Survey Results
- Hedge Fund Investor: What’s New and What’s Changed
- Calling All Regulators: Active and Recently Retired Regulators Prepare You for What’s Next
- The Evolving Business Model for Hedge Funds: Looking at the Future Model of Sustaining, Growing and Innovating
- Institutional Investor Perspective: The Future Partnership with Managers
In March 2016, EisnerAmper had the opportunity to participate in the annual GAIM Ops Cayman conference, one of the hedge fund industry’s leading operations and compliance events.
This year’s gathering brought together close to 500 operations, due diligence and compliance experts from the alternative investment industry. C-level personnel and fund managers made up the largest percentage of the attendees.
Over the course of the conference, the audience was polled on a variety of topics. The following report details those results.
As you review the responses, we want to offer our own insight to provide a more complete and in-depth look at the findings:
The Evolving Business Model for Hedge Funds
Fifty-five percent of respondents indicated the commingled hedge fund is not an endangered species.
While the commingled fund may not become extinct any time soon, the 2×20 pricing structure is long gone for equity based strategies. The 1.5×20 fee structure has grown in popularity due to pressure from the institutional investment community resulting from underperformance in recent years.
We anticipate that you will find hurdle rates incorporated into the incentive fee structure, wherein a manager must outperform a stated rate of return (e.g., 10-year bond) before the incentive can be taken.
Institutional Investor Perspective
More than 75% of respondents would consider increasing or beginning pursuing opportunities through liquid alternative products.
Liquid alternative mutual funds took off like wildfire from 2012-2014 as the number of new funds grew and AUM ballooned. However, for investors looking to gain access to certain strategies, the daily liquidity requirements for a liquid alternative mutual fund often prohibit certain securities and asset classes being included in the fund. These strategies are only accessible in a traditional commingled hedge fund structure.
More than half of the respondents felt it was important to meet personnel beyond the senior management team during operational due diligence (“ODD”) visits.
Post-Madoff, the role of ODD has grown dramatically. Whether investors are assigning the responsibility internally or outsource it to an ODD firm, managers must make sure their firms are of institutional quality from the front-middle-back office, legal/compliance, and infrastructure perspectives to win allocations.
(Click images to enlarge)
HEDGE FUND INVESTORS
What’s New and What’s Changed
Will the hedge fund industry continue to grow in assets or will there be consolidation among managers?
What is the biggest challenge facing managers today?
Where are fees heading over the next couple of years?
CALLING ALL REGULATORS
Active and Recently Retired Regulators Prepare You for What’s Next
Insider Dealing: Post-Newman, do you believe congressional action to codify “insider trading” would be beneficial?
Cybersecurity and cyber-related crime: Which elements of a cybersecurity program do you find the most difficult to implement?
Other policy and regulatory developments: Which of the following developments do you identify as the potential biggest threat to the hedge fund industry (Related to politics and regulations)?
THE EVOLVING BUSINESS MODEL FOR HEDGE FUNDS
Looking at the Future Model of Sustaining, Growing and Innovating
Is the commingled hedge fund an endangered species (and the 2 and 20 fee structure along with it)?
Which investor group(s) represents the most advantageous path for your goals in raising capital?
INSTITUTIONAL INVESTOR PERSPECTIVE
The Future Partnership with Managers
Who do you expect to win the U.S. Presidential election?
Demands for portfolio and operational transparency have increased dramatically over the last few years. How has your organization reacted to those demands?
Who are the most important people to meet during an operational due diligence visit?
Have you had Basel III-related conversations with your prime brokers?
Is your CCO function outsourced to a third-party compliance consultant?
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