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CHART CENTRAL

Less alignment, but so what?

Among 550 institutional investors surveyed by Preqin, 40% of those invested in hedge funds believed their managers’ interests are aligned with theirs. Comparatively, 82% and 81% of private debt and infrastructure fund investors, respectively, felt mutual interests were aligned. That said, hedge funds ranked second in number of allocations, with an average 2.4 commitments in 2017 per investor. An average 3.5 private equity funds were committed to over the same period.

Hedge funds saw a bit of a renaissance in 2017, according to Hedge Fund Research Inc., the asset class brought in $5.3 billion between March 31 and Dec. 31 after seven straight quarters of outflows that totaled just less than $83 billion. Industry pressure around high fees has taken its toll, and investors, chiefly large institutional ones, have made more progress negotiating favorable fee arrangements. With that said, perhaps the 60% that don’t feel their managers don’t exactly have their best interest in mind, are willing to give up some level of trust if the risk-adjusted returns justify the means.