What is the 2016 Outlook for Hedge Funds?
According to Karl D’Cunha, Senior Managing Director at Madison Street Capital, LLC., the hedge fund industry, which is currently “highly fragmented” will continue to consolidate, especially for partnership opportunities that connect product offerings with distribution. Madison Capital’s recent M&A overview taught us that in 2015, there were a total of 42 hedge fund deals that were closed on globally, which was 27% higher than the previous year.
In the fourth quarter of 2015, some of the key components that created the hedge fund momentum included hedge fund industry assets being at an all time high aside from 2015 hedge fund strategies that seemed less than great, in fact, were at most mediocre. Hedge fund performance was lagging behind, however, there were allocations being made by institutional investors with ab goal to received higher returns. Why? Mainly, because of more and more counts of liabilities. Who are the main players striving to bring in new capital? Smaller hedge fund managers.
Because of higher operating costs and a downward pressure building because of additional fees, strategic alternatives are being considered by hedge fund managers.
D’Cunha adds that in 2015, the environment for “deals” was thriving for hedge fund managers and he predicts deals will grow even stronger in 2016. Both buyers and sellers are being accommodated by multiple deals being made. Deals such as incubator or seed deals, PE bolt-ons and stakes and revenue share stakes are transactions being conducted by hedge fund managers.
Madison Capital is a mid-market investment banking firm providing multiple financial services that include business valuations, corporate advisories, financial reporting valuation and financial opinions. Formed in 2005, the investment banking firm works with its clients to help them determine the most beneficial mergers and acquisitions available.
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