EUROPE - Hedge fund managers' client base has become more institutional than retail over the past year - leading to an "insitutionalisation" of the industry, International Asset Management said.
In an interview with Global Pensions, the chief executive of the fund of hedge fund firm, Morten Spenner, said around 55% of assets are now managed by institutions - up from about 40% before the crisis.
He said the tilt in assets was triggered by an exodus by retail and high-net-worth clients from the industry post-Madoff, and a need for liquidity.
Spenner said: "Consequently, there will be less appetite for leverage, structured products and Madoff club-type deals."
He also said the predominance of institutional clients has led hedge funds and hedge fund of funds to become more process driven.
Spenner added: "The typical buyer is becoming more sophisticated... The high-net worth individual can't engage in the same way [as larger institutional investors]."
He said institutions were also putting pressure on fees, but noted managers are generally asking for some give and take - "agreeing to lower fees if clients agree to less liquidity".
His comments come on the heels of a new report by think-tank Open Europe that shows the proposed European Unions rules regulating alternative investment managers could cut investors' choice of managers by up to 80%.
The organisation said: "Under the new rules, investors will no longer be able to choose freely from the best performing funds and fund managers, because in a worst case scenario, they will be restricted to managers and funds established in the EU only."
The controversial directive calls for greater transparency on the alternatives management industry but has been lambasted for being too wide-sweeping and protectionist.
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