Big Hedge Funds Moonlight as Asset Managers in Bid for New Business

Hedge funds are expanding into the broader asset management industry, running nontraditional products such as long-only and liquid alternative strategies in order to meet new demand from institutional investors, according to a study released last week.

Deutsche Bank surveyed 200 investor entities worldwide that manage some $625 billion in hedge fund assets and 60 global hedge fund managers representing $528 billion in firmwide assets.

The study found that more than half of investor respondents allocated to nontraditional hedge fund products. These included 36% who invested in hedge fund-run long only, and 33% who invested in liquid alternatives operated by hedge fund managers.

One third of all investors increased their allocations to nontraditional hedge fund products last year, and another 43% on average planned to increase their allocations over the next 12 months.

According to the study, 50% of manager respondents ran nontraditional hedge fund products, and 48% of those managers had seen more than half of new business since 2008 directed toward nontraditional hedge fund products.

Large, well-established firms were most likely to have diversified their product range, the study found. Eighty-one percent of managers with more than $5 billion in hedge fund assets under management had launched at least one nontraditional hedge fund product.

Twenty percent of all responding managers planned to launch at least one non-traditional hedge fund product over the next 12 months, and another 42% were considering doing so.