New research from KPMG International and the Alternative Investment Management Association (AIMA) finds that hedge funds are preparing to emerge from disruption caused by the coronavirus pandemic more resilient, adaptable, diverse, efficient, and productive.
The report, Agile and Resilient: Alternative investments embrace the new reality, surveys 144 hedge fund managers globally, representing an estimated US$840 billion in assets under management (AUM). The survey was conducted in real-time throughout the pandemic and the report also includes one-on-one insights from key players across the industry.
- 57% of hedge fund firms globally have hired or were looking to hire during the time of COVID-19
- 81% of respondents are investing in digital/IT capabilities
- The industry is prioritising culture and wellbeing as it embraces hybrid models of working
Frank Gannon, Head of Asset Management, KPMG in Ireland commented on the research: “The hedge fund industry has been innovative, agile, and resilient through the pandemic, and our survey bears this out. Our research shows that a good number of hedge funds see this as a time to attract new talent to their firm. They are evaluating their existing operating model and adjusting their core processes, cost structures and work environments so they are positioned to grow and meet the changing needs of investors.”
The report examines the following themes, with the key findings highlighted below.
- Attracting and retaining talent – Hedge funds have continued to make strategic hires, with the new decentralised nature of working creating opportunities for managers to reach outside of their normal captive locations in the search for new talent. Fifty-seven percent of all managers said they have either hired or are actively looking to hire new talent since the pandemic began.
- Embracing a new reality – Many firms continue to enhance their culture, prioritising the mental health and wellbeing of employees. Almost two-thirds, 61 percent, see the flexibility gained by employees working remotely as a positive with 46 percent highlighting the benefits to employees of commuting less.
- Smart sourcing – 71 percent of respondents cited the success of operating in the current remote working environment as a catalyst to increase outsourcing operational and technological solutions to improve efficiency, generate cost savings and manage margins more effectively.
- Innovating the IT environment – More than 80 percent of respondents are investing in their digital infrastructure and IT capabilities. Half of all firms say they are investing in cyber security measures with one-in-three firms saying they are building a central data warehouse to facilitate data analysis and reporting.
- Returning to the office – Firms are taking a flexible and collaborative approach to developing their return to office plans, with the need to modify physical workspace (64 percent), train staff on new protocols for hygiene, sanitization, etc. (44 percent) and commuting concerns (42 percent) identified as key issues.
- Investor Relations 2.0 – With face-to-face meetings now all but impossible, 58 percent of hedge fund managers say they are optimizing their use of digital tools (such as video conferencing and data rooms) to improve their IR model. The flexibility and increased frequency of virtual meetings is benefiting both investors and managers and has levelled the playing field between investors and managers of all sizes.
- Driving for efficiency – Like most businesses, hedge funds are having to make tough decisions to manage their business more efficiently through this period. More than 25 percent of respondents say they have plans to increase efficiency by investing more in technology.
- Planning for the future – Fund managers are planning for both opportunities and ongoing disruption. One-in-five respondents see this as a time to redefine business models. The COVID-19 experience has shown them to be able to reinvent their business and operating models pointing to a hedge fund industry that is more agile and resilient.