26 May 2010
Managed accounts have experienced extraordinary growth in the aftermath of the financial crisis and the reasons for this trend are examined in a new report published today by Moody's Investors Service. The report takes an in-depth look at this type of structure and the inherent risks involved, and assesses the future impact it may have
on the hedge fund sector as a whole.
Estimates suggest that managed accounts through the top ten platforms have reached approximately $41 billion or 2% of the total hedge fund industry assets.
The report notes that managed account adoption was limited in the past because this type of instrument is generally more costly than direct hedge-fund investments and can pose operational complexities. As the market continues to normalize, these limiting factors could again become more important and reduce future growth of managed accounts. Furthermore, the report highlights the variations in the different managed account structures available and details some of the operational risks and challenges faced by investors utilising these investment vehicles.
on the hedge fund sector as a whole.
"Although managed accounts have been around for a while, they enjoyed a surge in popularity after the market upheaval of 2008 due to the benefits they offer, such as access to liquidity and ownership of assets," says Joanne Job, a Moody's Analyst and author of the report. "The financial crisis coupled with many hedge funds imposing liquidity restrictions prompted investors to look for fund offerings that gave them more control over their investments and managed accounts filled this market need."
Estimates suggest that managed accounts through the top ten platforms have reached approximately $41 billion or 2% of the total hedge fund industry assets.
The report notes that managed account adoption was limited in the past because this type of instrument is generally more costly than direct hedge-fund investments and can pose operational complexities. As the market continues to normalize, these limiting factors could again become more important and reduce future growth of managed accounts. Furthermore, the report highlights the variations in the different managed account structures available and details some of the operational risks and challenges faced by investors utilising these investment vehicles.
"We believe that the managed account segment will continue to grow in a pronounced way in the short term and more moderately in the medium to long term," concludes Job.
