How People Choose Hedge Funds: The Importance Of Branding
From Hedge Funds
April 21, 2017 - 8:41am
Choosing hedge funds can appear to be a complicated process, one riddled with different elements that weigh unequally upon the individual's wants. Do people pick them based on returns? How important is the fund manager? What role does the investor want to play? How active of a role? Do they go for familiar names and brands?
Agecroft Partners' Don Steinbrugge, one of the top experts in the hedge fund industry, spoke with Benzinga about the process and psychology behind it.
Hedge Fund Branding And Asset Flows
Benzinga: Are hedge fund branding and asset flows correlated?
Don Steinbrugge: There’s a bunch of different ways to approach hedge fund branding. However, the big picture is that most assets are flowing to hedge funds that have the strongest brands. 91 percent of assets are currently allocated to hedge funds that manage $1 billion or more in assets — which account for only 5 percent of the industry.
On the other hand, hedge funds with less than $100 million in AUM are getting less than 2 percent of assets, despite representing a vast majority of hedge funds in the industry.
Moreover, the concentration to the largest managers has increased over the past eight years as large institutional investors, such as public pension funds and corporate pension funds, continue to represent a larger and larger percentage of the industry. [Now, this concentration derives from the fact that] a number of these pension funds prefer to invest in the hedge funds that are very well known because if something happens to them they can point to the fact that a lot of other people also invested in those funds.
BZ: Can’t this be problematic?
I think this is one of the problems of the industry because there are a lot of hedge funds that are managing more assets than are optimal for their strategy; ...Full story available on Benzinga.com
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