GPP: concerns over hedge fund performance are short-term
22 January 2019 London
Image: Shutterstock
Concerns over hedge fund performance in Q4 2018 are short-term and dramatically overplayed, according to Sean Capstick, head of prime brokerage at GPP.
Capstick affirmed that the terminal decline of the hedge fund industry “is a recurring theme which has failed to play out”.
He indicated recent outflows are unremarkable given the industry’s scale and “the opportunity for large banks to grow their prime brokerages is significant”.
“Despite oft-discussed pressures on fees, performance and reporting, the industry has doubled in size since the recession and reached a peak of $3.6 trillion at the end of Q3 2018.”
Capstick discussed how in recent months a number of investments banks have signalled their intentions to grow prime broking operations and revenue, capitalising on a hedge fund industry which, contrary to reports, is in good health.
Capstick explained though a greater choice of service providers is obviously positive for hedge fund managers, most bank’s attention will remain on the largest managers responsible for more than $1 billion of assets.
However, he stated this is not to say that large banks won’t take the occasional risk on smaller managers.
He said: “While the focus will be on the billion dollar stars, some banks will support managers with potential to rapidly achieve scale, with the right to withdraw services from any that don’t subsequently make the cut.”
He added: “Such rapid growth will not be practical for the majority of new and growing managers, who will build businesses based on steady and sustainable expansion plans.”
Capstick concluded: “The industry has seen some high profile hedge fund closures in recent months, but emerging managers with innovative strategies are constantly coming through to take their place.”
“In order to keep the hedge fund industry healthy we need a steady supply of patient prime broking services for managers of all sizes, but particularly at the entrepreneurial end of the scale where today’s startup could be tomorrow’s billion dollar giant.”
Capstick affirmed that the terminal decline of the hedge fund industry “is a recurring theme which has failed to play out”.
He indicated recent outflows are unremarkable given the industry’s scale and “the opportunity for large banks to grow their prime brokerages is significant”.
“Despite oft-discussed pressures on fees, performance and reporting, the industry has doubled in size since the recession and reached a peak of $3.6 trillion at the end of Q3 2018.”
Capstick discussed how in recent months a number of investments banks have signalled their intentions to grow prime broking operations and revenue, capitalising on a hedge fund industry which, contrary to reports, is in good health.
Capstick explained though a greater choice of service providers is obviously positive for hedge fund managers, most bank’s attention will remain on the largest managers responsible for more than $1 billion of assets.
However, he stated this is not to say that large banks won’t take the occasional risk on smaller managers.
He said: “While the focus will be on the billion dollar stars, some banks will support managers with potential to rapidly achieve scale, with the right to withdraw services from any that don’t subsequently make the cut.”
He added: “Such rapid growth will not be practical for the majority of new and growing managers, who will build businesses based on steady and sustainable expansion plans.”
Capstick concluded: “The industry has seen some high profile hedge fund closures in recent months, but emerging managers with innovative strategies are constantly coming through to take their place.”
“In order to keep the hedge fund industry healthy we need a steady supply of patient prime broking services for managers of all sizes, but particularly at the entrepreneurial end of the scale where today’s startup could be tomorrow’s billion dollar giant.”
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