KPMG/AIMA survey: HFs expanding hybrid IR efforts

The joint KPMG/AIMA hedge fund industry fourth-quarter 2021 survey shows that while all remain bullish on investor capital raising efforts, the ongoing pandemic spells continued reliance on virtual due diligence methods.

In the report, “Accelerating out of the pandemic,” industry group AIMA outlines a number of trends ranging from technology to product innovation. Perhaps one of the most interesting sections is on capital raising, where 72% of respondents said that previous relationships with investors are key to growing and retaining assets.

The survey, conducted in the third quarter, included responses from 162 investment professionals representing over $1 trillion in assets under management. It’s the second time KPMG has paired up with AIMA to pinpoint broader industry trends. A 2020 report focused on resilience during the pandemic.

The insights come at a time when the industry has broken asset records and is starting to see interest pick up again in hedged strategies.

Over half (56%) said they saw the virtual fundraising environment staying in place over the short to medium term, which does not pose a significant challenge to capital raising, they said. Still, 30% saw longer lead times to complete due diligence and ultimately investment as an issue.

“Successful investment managers have adapted their operating models to appropriately accommodate the needs and evolving requirements of investors for effective due diligence in the virtual world,” wrote Joseph Fisher, senior lead partner, alternative investments at KPMG US.

Looking at fee structures, managers (32%) see continued downward pressure on management fees over the next 12 months, while 17% said that liquidity relative to lock-up periods was a key concern. Only a handful 8% saw incentive fee pressure.

Given the challenges of an ongoing virtual fundraising world, a total of 32% of respondents said they plan to expand the size of their investor relations teams and increase the importance that IR plays in the firm. Another 29% said they plan to increase the amount of time their senior management team spends on investor relations as well.

The expansion of investor relations teams will need to be carefully managed, according to KPMG/AIMA, as there is limited availability of IR professionals in the current hiring environment.

While some say senior staffers will pick up the slack, interestingly another 16% plan on investing heavily in investor relations technology.

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