Hedge funds have returned 3.53% for the year. But it has been a tough environment.
The asset base for the industry contracted by $10.4 billion (€9.9 billion) in 2016.
Eurekahedge said this was due to steep redemption pressure with net outflows totalling $28.2 billion for the year.
European hedge funds were worst hit, with a decline of over $21 billion in assets.
Crisil, which is part of S&P Global, has offered tips for hedge fund managers that might garner them higher returns.
The firm says hedge funds are facing challenges including an increase in regulatory reporting and competition. But the main challenge is generating good returns in a changing economic environment, the firm said.
Here are some of Crisil’s tips:
- Fund managers have to develop in-house capabilities to manage the increased reporting demands from investors and regulators. However, this takes their resources away from their core competency, which is generating alpha.
- Service providers – such as risk managers and advisers – have emerged as a key strategic partner to provide various services, which were earlier considered to be difficult to outsource.
- Some of the expert advisers work as an extended part of the fund management team and provide support on their pre- and post-investment decisions wherever required. The new services also include identifying strategy, selecting managers and implementing strategy in coordination with the investment managers.
- Selecting the right partner can promote process excellence and enable managers to progress, Crisil said. Funds can also save costs related to maintaining in-house technology, headcount and operations.
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