The definitive form of alignment between hedge fund managers and investors remains skin in the game with over 90 per cent of fund managers surveyed investing their own monies into their funds with the average investment standing at eight per cent of AuM (assets under management). ‘In Sync: How hedge funds achieve alignment with investors to foster long-term strategic partnerships’ ‒ a report from the Alternative Investment Management Association (AIMA), in partnership with RSM International Investors ‒ shows the purest form of alignment between fund managers and investors remains skin in the game that principals have in their funds. This approach is now expanding to include highly skilled investment executives to ensure they remain focused on delivering for their investors as well as dissuading them from exiting the fund amid the increasing war for talent across the industry. It also shows investors are increasingly making a high level of transparency around fees and expenses a prerequisite to any allocation with 70 per cent citing greater transparency as the best way to improve alignment. Fund managers and investors also continue to explore more equitable compensation arrangements which meet their expectations. In addition to hurdle rates becoming more popular, the modern fee model is underpinned by a variety of relationship pricing, lock-ups, and other value service offerings.
- PWC