Citi: Hedge Fund Profits Plunge, Small Funds Hit Hardest
Jan 30 2015 | 4:44am ET
Profits in the hedge fund industry are set to decline by 30% due to poor performance in 2014, according to a recent survey by Citi.
While hedge fund industry profits in 2013 reached $31.2 billion, poor performance in 2014 cut that figure by 30% to only $21.9 billion, a loss of nearly $10 billion, Citi estimates in their Third Annual Hedge Fund Industry Operating Metrics Survey.
Institutionalization of the hedge fund investor base has shifted the profitability ratios of the industry, Citi notes. Profits derived from management fee revenues now equal profits from performance fee revenues in years like 2013 when managers meet institutional targets of 10% annual returns.
“Management fee revenues have become an increasingly important part of the industry’s profit base in recent years,” said Sandy Kaul, global head of business advisory services at Citi. “Lower institutional return targets and concerns about excessive volatility make it more difficult for managers to earn outsized performance fees. With AUM at record highs, profits from management fee revenues now account for a larger share of total profits, coming in at nearly 2.5 times performance fee profits in years when performance is down such as in 2014.”
http://www.finalternatives.com/node/29795
Jan 30 2015 | 4:44am ET
Profits in the hedge fund industry are set to decline by 30% due to poor performance in 2014, according to a recent survey by Citi.
While hedge fund industry profits in 2013 reached $31.2 billion, poor performance in 2014 cut that figure by 30% to only $21.9 billion, a loss of nearly $10 billion, Citi estimates in their Third Annual Hedge Fund Industry Operating Metrics Survey.
Institutionalization of the hedge fund investor base has shifted the profitability ratios of the industry, Citi notes. Profits derived from management fee revenues now equal profits from performance fee revenues in years like 2013 when managers meet institutional targets of 10% annual returns.
“Management fee revenues have become an increasingly important part of the industry’s profit base in recent years,” said Sandy Kaul, global head of business advisory services at Citi. “Lower institutional return targets and concerns about excessive volatility make it more difficult for managers to earn outsized performance fees. With AUM at record highs, profits from management fee revenues now account for a larger share of total profits, coming in at nearly 2.5 times performance fee profits in years when performance is down such as in 2014.”
http://www.finalternatives.com/node/29795
f course they could blame some of poor performance on a sector with BAC in it.LOL; but WFC is in that sector so they cant blame everyone else/LOL Thanks