Hedge funds prove agile and resilient as they embrace the new reality: latest research from KPMG and AIMA
Hedge funds prove agile and resilient
- 57% of hedge fund firms globally have hired or were looking to hire during the time of COVID-19
- 81% of respondents are investing in digital/IT capabilities
- The industry is prioritizing culture and wellbeing as it embraces hybrid models of working
New research from KPMG International and the Alternative Investment Management Association (AIMA) finds that hedge funds are preparing to emerge from disruption caused by the coronavirus pandemic more resilient, adaptable, diverse, efficient, and productive.
The report, Agile and Resilient: Alternative investments embrace the new reality, surveys 144 hedge fund managers globally, representing an estimated US$840 billion in assets under management (AUM). The survey was conducted in real-time throughout the pandemic and the report also includes one-on-one insights from key players across the industry.
The report examines the following themes, with the key findings highlighted below:
- Attracting and retaining talent – Hedge funds have continued to make strategic hires, with the new decentralized nature of working creating opportunities for managers to reach outside of their normal captive locations in the search for new talent. Fifty-seven percent of all managers said they have either hired or are actively looking to hire new talent since the pandemic began.
- Embracing a new reality – Many firms continue to enhance their culture, prioritizing the mental health and wellbeing of employees. Almost two-thirds, 61 percent, see the flexibility gained by employees working remotely as a positive with 46 percent highlighting the benefits to employees of commuting less.
- Smart sourcing – 71 percent of respondents cited the success of operating in the current remote working environment as a catalyst to increase outsourcing operational and technological solutions to improve efficiency, generate cost savings and manage margins more effectively.
- Innovating the IT environment – More than 80 percent of respondents are investing in their digital infrastructure and IT capabilities. Half of all firms say they are investing in cyber security measures with one-in-three firms saying they are building a central data warehouse to facilitate data analysis and reporting.
- Returning to the office – Firms are taking a flexible and collaborative approach to developing their return to office plans, with the need to modify physical workspace (64 percent), train staff on new protocols for hygiene, sanitization, etc. (44 percent) and commuting concerns (42 percent) identified as key issues.
- Investor Relations 2.0 – With face-to-face meetings now all but impossible, 58 percent of hedge fund managers say they are optimizing their use of digital tools (such as video conferencing and data rooms) to improve their IR model. The flexibility and increased frequency of virtual meetings is benefiting both investors and managers and has levelled the playing field between investors and managers of all sizes.
- Driving for efficiency – Like most businesses, hedge funds are having to make tough decisions to manage their business more efficiently through this period. More than 25 percent of respondents say they have plans to increase efficiency by investing more in technology.
- Planning for the future – Fund managers are planning for both opportunities and ongoing disruption. One-in-five respondents see this as a time to redefine business models. The COVID-19 experience has shown them to be able to reinvent their business and operating models pointing to a hedge fund industry that is more agile and resilient.
“The hedge fund industry has been innovative, agile, and resilient through the pandemic, and our survey bears this out,” said Andrew Weir, Global Head of Asset Management, KPMG International. “Our research shows that a good number of hedge funds see this as a time to attract new talent to their firm. They are evaluating their existing operating model and adjusting their core processes, cost structures and work environments so they are positioned to grow and meet the changing needs of investors.”
“Ultimately, hedge funds will find the right balance of a more decentralized environment with the necessary face to face interaction in the office,” said Joseph Fisher, Senior Partner, Asset Management, KPMG in the US. “The ability to collaborate will unquestionably be a prime consideration as firms continue to adapt to the new reality.”
“The COVID-19 experience has proven that hedge fund managers operations’ and their ecosystems are robust and fully adaptable, even during the most severe of lockdowns.” said Tom Kehoe, AIMA’s Global Head of Research and Communications.
“This environment has created new opportunities for hedge funds; catalyzing industry actors to adapt to a new reality,” added Kehoe. “Investment in smart sourcing and enabling hybrid working practices will not only improve efficiency but also prioritizes employee wellbeing. Ultimately this should benefit an industry that will emerge stronger and more diverse to sustain its future growth.”
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About KPMG International
KPMG is a global network of professional services firms providing Audit, Tax and Advisory services. We operate in 147 countries and territories and have 219,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
Throughout this press release, “we”, “KPMG”, “us” and “our” refer to the network of independent member firms operating under the KPMG name and affiliated with KPMG International or to one or more of these firms or to KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.
The Alternative Investment Management Association (AIMA) is the global representative of the alternative investment industry, with more than 2,000 corporate members in over 60 countries. AIMA’s fund manager members collectively manage more than $2 trillion in hedge fund or private credit assets. AIMA draws upon the expertise and diversity of its membership to provide leadership in industry initiatives such as advocacy, policy, and regulatory engagement, educational programs and sound practice guides.
AIMA works to raise media and public awareness of the value of the industry. AIMA set up the Alternative Credit Council (ACC) to help firms focused in the private credit and direct lending space. AIMA is committed to developing skills and education standards and is a co-founder of the Chartered Alternative Investment Analyst designation (CAIA) – the first and only specialized educational standard for alternative investment specialists. AIMA is governed by its Council (Board of Directors). For further information, please visit AIMA’s website, www.aima.org.