GLOBAL - The skill sets of fund managers have failed to keep pace with an increasingly sophisticated investment environment, a survey by KPMG has revealed.
It found 57% of traditional fund management firms used derivatives in their portfolios, with one in three institutional investors saying they invested in such instruments.
However, KPMG also found investor interest was waning, with over half of mainstream fund managers saying returns had fallen and around the same proportion reporting a fall in subscriptions.
In addition, six out of ten respondents thought trust in fund managers had been eroded due to the impacts of the credit crisis.
James Suglia, chairman of KPMG´s global alternatives advisory committee and US partner, who presented the report at Fund Forum International in Barcelona, told Global Pensions: "Over the last few years the use of complex instruments has increased quite a bit. Mainstream managers have dramatically increased their use of such instruments, including hedge funds."
However, Suglia said the level of knowledge in relation to the use of such instruments had not increased at the same rate. He said: "Investor trust has clearly been jeopardised."
Suglia said the trust could be rebuilt by improving communication and transparency, enhancing risk management, and filling resource gaps.
"So far banks have largely borne the brunt of the impact of the credit crunch but this new research shows that the fund management industry has been damaged too and not just in terms of performance.
"This industry faces a challenge to build up the bottom line and respond in real and practical ways to the issues the credit crunch has raised," he concluded.
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