Hedge Fund Strategy and Fee Forecasts

Hedge fund managers are predicting that distressed securities and global macro strategies will perform best in 2009 (see Reuters article). Unfortunately, the support for each strategy is not overwhelming since only around 20 percent of managers choose distressed securities, along with 17 percent picking global macro. A total of 15 percent picked managed futures, which on whole have gained 18 percent in 2008.

In addition to predicting strategy winners and losers for 2009, over 30 percent of those surveyed expected hedge funds to reduce or eliminate management fees in order to retain investors. An additional 15 percent expected cuts in performance fees, indicating that the 2-20 model may gravitate to a 1-10, or something similar.