More U.S. hedge funds are expanding into new asset classes and new parts of the world as they search for better returns, according to a new report by financial industry consultant Tabb Group. The report, based on a survey of 81 U.S.-based hedge funds with a combined $89 billion in assets under management, found that 67% of the hedge funds surveyed are expanding, compared with 41% a year ago.
"More and more U.S.-based hedge funds are expanding into new markets, whether that's overseas or into different asset classes," said Adam Sussman, one of the report's authors. "The driver is that U.S. markets are overcrowded in terms of cash looking at the same (investment) opportunities."
The report also found that U.S. hedge funds are looking for more detailed information and data on industry sectors and companies and, as their assets under management increase, their spending on such research also increases.
"There's a correlation between the assets under management and the increase in spending," he said. "Alpha isn't cheap for the investor who pays performance fees and management fees, but it's also not cheap for managers as well. It's not cheap to go out and find investments."
According to the report, the 50% of survey respondents expressing concern about SEC registration spent between $64,000 and $374,000 on the registration process, depending on the size of the fund.
In addition, hedge funds expect assets under management from pension funds to increase to 19% in 2008, from 15% currently.