So much for the death of hedge funds.
Asset management, having been through a couple of tough years, is back to doing fairly well for itself – and that includes hedge funds – according to the Boston Consulting Group.
The industry as a whole is back from a nasty 2008 with global assets under management rebounding from $47,000bn in 2008 to $52,600bn. Even more importantly for those concerned, the post-crash squeeze on operating margins seems to be easing.
The BCG figures unveiled this week show operating margins falling from a very rich 40 per cent in 2006 to 31 per cent last year, but they are projected to stabilise at 31 to 35 per cent this year. As Monish Kumar, a BCG partner, put it at a briefing in New York this week:
“This is a good business to be in – the margins are very high and the capital requirements are low. Maybe it is not quite as good a business as a while back, but it is still damn good.”
There are some signs of the hedge fund fee structure being under attack – 40 per cent of hedge funds reported pricing pressure – but they are not exactly suffering.
I asked the old question about financial services – why, with so many competitors, the margins persistently refuse to get competed away (when, unlike the pharmaceuticals industry, for example, there is no patent protection).
“Like pills, people don’t really know what’s inside,” replied Andy Maguire, another BCG partner. Despite the push for greater transparency from hedge funds, I suspect he is right.
