Increased investor demand for hedge fund techniques may contribute to at least one recent trend: fund resistance to fee compression. In 2021, management costs for equity funds remained stable at 1.52% (up from 1.51% in 2020), while fees for non-equity funds increased to 1.66% (up from 1.52% in 2020).
Other findings in the study may indicate that a balance has been struck in terms of aligning the interests of managers and investors. The percentage of equity funds with lock-up or gated declined, but the percentage of funds with incentive allocation constraints increased by 10% from 2020.
Several emerging trends in seed capital investment activity, according to study lead author Nick Miller, partner in Seward & Kissel’s Investment Management Group. Among them is an increased interest among seeders in hybrid and healthcare-focused strategies, a trend that Seward & Kissel continues to see in the current launch market in 2022.
“The strong appetite among seeders for hybrid fund structures is surprising given the increasing conversation with both new managers and established managers regarding hybrid or public/private products. It is a natural extension that seeders would be interested in these types of funds,” Miller said. “We expect hybrid structures to continue as a generally growing trend into 2022, with investments targeting industries such as healthcare, tech and digital assets, all of which saw significant interest in the new launch space this year. is.”
Equity or equity-related strategies were used by 70% of new hedge funds created in 2021, up from 66% in 2020. In the standard classes across all strategies, incentive allocation rates averaged 20% of annual net income (up slightly from 19% year over year). 2020), while about 21% of all funds had an incentive allocation constraint (up from 10% in 2020).