What institutional investors expect

Investors look for a more institutional business model of hedge funds. According to a Deutsche Bank study, hedge funds will face “challenges in regulatory, reputational, business and operational risks, in addition to delivering returns”.

Deutsche Bank Global Prime Finance asked 70 investor entities with about USD2.75 trillion of assets in their Operational Due Diligence Survey Summer 2014.

A main concern for institutional investors was global and continuous regulatory pressure. 73% stated, that they are in favour of a sharper regulatory compliance such as more regular cross-boarder reporting.

68% of the asked investors would invest into emerging managers but with smaller amounts compared to what they invest in established ones.

Controlling expenses of funds is important as well. 64% say that they question miscellaneous expenses and will limit them when investing in a fund. Among those expenses are employee compensation, marketing and non-research related travel costs.

All investors seek for an independent pricing of assets in a fund and review the valuation methods used by the management.

Most investors would out of cycle review a fund - the review of the fund’s operation due to an specific event - due to regulatory investigation (94%) and the departure of a key person (75%).