COOConnect: Predictions for 2014

23 Dec, 2013

In the fifth and final instalment of COOConnect’s series summarising the key events to impact hedge funds in 2013, we look to predict what lies ahead for managers next year.

Predictions for 2014

Expect performance to remain solid and global hedge fund Assets under Management (AuM) to reach new highs as return-hungry pension funds pile into alternatives in 2014.

Expect macroeconomic uncertainty to hinder the performance of macro strategies and trend-following hedge funds in 2014.

Expect investment consultants to become more powerful and take on increased risks through greater exposure to niche or emerging hedge fund managers in 2014.

Expect consolidations and liquidations in the funds of hedge funds industry to continue even if performance improves in 2014.

Expect investors and managers to be sceptical of boutique managed account platforms post-AlphaMetrix with bank-backed or large asset manager-backed platforms reaping the rewards in 2014.

Expect regulated alternatives such as ’40 Act hedge funds to grow albeit marginally in 2014.

Expect some sort of a tentative agreement between prime brokers, international central securities depositories (ICSDs) and custodian banks on depository liability as mandated under the Alternative Investment Fund Managers Directive (AIFMD) in 2014.

Expect more depository-lites to be set-up pre-AIFMD implementation but do not expect these organisations to be a long-term solution in 2014.

Expect managers to get to grips with AIFMD reporting in 2014.

Expect clarity on remuneration and private placement and the exiting of some US managers from the EU in 2014.

Expect fee pressure from institutional investors to continue, particularly if performance is static in 2014.

Expect more hedge fund managers to sign up to Albourne Partners’ Open Protocol initiative in 2014.

Expect more data security breaches at financial institutions in 2014.

Expect managers to endure some hassle when the European Markets Infrastructure Regulation (EMIR) comes into effect in 2014.

Expect more regulatory dithering on agreeing procedures to handle a central counterparty clearing house (CCP) default, and expect managers to start thinking more carefully about the counterparty risks at their CCPs in 2014.

Expect the Foreign Account Tax Compliance Act (FATCA) to be delayed amid the deluge of Intergovernmental Agreements (IGAs) waiting to be ratified while managers should brace themselves for some reporting pain in 2014.

Expect Form PF submissions to the Securities and Exchange Commission (SEC) to become much easier although be prepared for your clients to ask for copies of the document in 2014.

Expect the JOBS Act to have little, if any, meaningful impact on hedge fund advertising and marketing efforts in 2014.

Expect the UK’s Financial Conduct Authority (FCA) to demand that managers be more transparent with end investors about their research costs in 2014.

Expect greater scrutiny from US regulators and law enforcement officials in light of their successes against SAC Capital and Harbinger Group in 2014.

Expect China’s hedge fund liberalisation policies to underwhelm and for the first-movers into Shanghai to incur short term losses in 2014.

Expect some movement towards corporate governance reform in the Cayman Islands and lots of conference panel debates on the subject again in 2014.

Expect very few, if any, managers to replicate Bridgewater’s approach to shadow fund administration.






Albourne PartnersChinaCayman IslandsBridgewaterSAC CapitalHarbinger GroupFCAJOBS ActAIFMDSECForm PFFATCADodd-FrankEMIRAlphaMetrixregulated alternativesmanaged accounts