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Home > Business/Finance > Financial Services > Fund Management
Hedge Funds in Europe 2005
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| Published Date:
November 2005
Published By:
Datamonitor
Page Count:
95
Order Code:
R313-13296
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- EXECUTIVE SUMMARY
- Market context
- Distribution
- Future market growth
- The hedge fund market of the future
- INTRODUCTION
- What is this report about?
- Who is the target reader?
- How to use this report
- CHAPTER 1 MARKET CONTEXT
- Key findings
- The hedge fund market in Europe is growing rapidly
- The UK and France are the largest markets for hedge fund investment in Europe
- The UK dominates hedge fund management in Europe
- European equity is the largest investment class for hedge funds managed in Europe
- Large hedge fund competitors are continuing to grow rapidly in the European market
- Larger funds were the key beneficiaries of growth in the hedge fund market in 2004
- Individual hedge fund competitors can be rapidly undermined by poor performance
- GLG partners is the largest competitor in the European hedge fund market
- A single European regulatory framework for hedge funds seems unlikely in the short-term
- The US and Germany have pressed for pan-national hedge fund regulation
- UCITS III has created a market for mutual funds with an element of hedge fund investment in Europe but not for pan-European hedge funds
- The Markets in Financial Instruments Directive (MiFID) will affect the conduct of business rules for hedge funds
- The European Union Savings Tax only affects hedge funds which invest in fixed interest instruments
- The change from the Capital Adequacy Directive to the Capital Requirements Directive will have a limited impact on hedge funds
- Most jurisdictions generally tax hedge funds in the same way as other investments
- Tax remains a barrier to the distribution of foreign hedge funds in many countries
- There continue to be major differences in the regulation of hedge funds in different juristictions
- France offers a multi-step approach to hedge funds
- New regulations introduced in 2004 opened up investment to mass market customers
- Hedge funds in France are taxed in the same way as UCITS mutual funds
- There continue to be considerable barriers to hedge fund investment in Germany
- The Investment Act 2004 broadened access to hedge funds
- The taxation of hedge funds was clarified by regulation introduced in 2003
- Italian hedge fund regulation does not allow investment by mass market customers
- Minimum investments for Italian hedge funds mean only ultra-high net worth and corporate customers can invest in the products
- The tax treatment of hedge funds in Italy discriminates against foreign funds
- Spain has regulated for the creation of a hedge fund market
- The new regulation will make hedge funds available to HNW and corporate invesors in Spain
- Most Spainish hedge fund investors will be taxed on both income and capital gains
- The UK regulator remains cautious in its approach to hedge funds
- In the UK hedge funds are only available to qualified and corporate investors
- Mass market customers are still not able to invest in hedge funds but may be able to gain access to some hedge fund-like products
- Hedge fund investments are fully taxed in the UK
- Institutional customers are the most important customer segment for hedge funds in Europe
- Institutions and HNW individuals are the key customer groups for hedge funds
- The focus on HNW and institutional customers is fairly universal across different countries
- Opportunities in the institutional market include the potential to sell into funds-of-hedge funds, pension funds and insurance companies
- Most asset managers agree that funds-of-hedge funds is the most appropriate form of the product for investors
- Data
- CHAPTER 2 DISTRIBUTION
- Introduction
- Key findings
- Financial advisers are seen as the best means of distributing hedge funds to mass market customers in Europe
- Private banks are the key distributors of hedge funds to wealthy customers
- The penetration of investment consultants within the institutional customer market varies between countries
- Data
- CHAPTER 3 FUTURE MARKET GROWTH
- Introduction
- Key findings
- Hedge fund investment in Europe is expected to increase rapidly in the next five years
- The hedge fund market is expected to experience strong growth across customer segments
- Asset managers are expecting strong growth in the mass market investment in hedge funds
- Nearly half of European asset managers believe that HNW investment in hedge funds will grow very rapidly
- More than 60% of European asset managers expect strong growth in institutional investment in hedge funds
- Spain is the country where the most hedge fund growth is expected to occur
- Data
- CHAPTER 4 THE HEDGE FUND MARKET OF THE FUTURE
- Key findings
- Regulatory issues are the key challenge facing hedge fund managers in Europe going forward
- Asset managers in Spain were particularly concerned about regulatory barriers to growth
- Further regulation of the hedge fund market is supported by asset managers in Spain and Italy
- Hedge funds will become more consolidated and transparent
- Most asset managers believe the hedge fund market will consolidate
- Hedge funds are expected to become more transparent in order to attract funds
- Most European asset managers believe that performance related fees will become more common in hedge funds
- A strong history of investment performance will be the most important feature for successful hedge funds in the future
- Data
- APPENDIX
- Supplementary data
- Research methodology
- Datamonitor's European Alternative Investments Survey 2005 methodology
- Methodology for aggregating asset managers' growth expectations
- Datamonitor's hedge fund investment market size estimates and forecasts
- Market size estimates
- Forecasts
- Definitions
- Arbitrage
- CAGR
- Derivative
- Funds-of-hedge funds
- Fund supermarket
- Hedge fund
- HNW
- IFA
- Liquid assets
- Mass affluent
- OEICs
- Selling short
- Ultra HNW
- Unit trusts
- Further reading
- Datamonitor Savings & Investments SPP Reports
- Datamonitor Savings & Investments SPP: Reports & Briefs
- Asset Management and Funds
- Offshore Financial Services
- Retail Savings and Investments
- Datamonitor Savings, Investments and Protection SPP: Interactive Models
- Related Global Wealth Service SPP Reports
- Datamonitor Global Wealth Service SPP: Reports
- Datamonitor Global Wealth Service SPP: Insight Reports
- Datamonitor Wealth Management Competitor Tracker
- SPP writing team
- List of Tables
- Table 1: The European hedge fund market by location of manager, 2004-2005 H1
- Table 2: European hedge fund assets by investment strategy, 2003-2005 H1
- Table 3: European hedge funds assets by competitor, 2003-2004
- Table 4: Which customer segment do you consider to be the core target market for hedge funds?, European overview
- Table 5: Which customer segment do you consider to be the core target market for hedge funds? By country
- Table 6: Institutional clients offer greatest potential for the hedge fund industry
- Table 7: Which type of institutional investor is the main target market for hedge funds or funds-of-hedge funds?
- Table 8: Responses to the statement: Funds-of-hedge funds is the most suitable way of providing investors with exposure to this asset class (hedge funds)
- Table 9: What do you think is the best way for hedge funds or funds-of-hedge funds to be distributed to mass market investors?
- Table 10: What do you think is the best way for hedge funds or funds-of-hedge funds to be distributed to high net worth investors?
- Table 11: What do you think is the best way for hedge funds or funds-of-hedge funds to be distributed to institutional investors?
- Table 12: European hedge fund market, hedge fund assets held by investors, 2004e-2009f
- Table 13: Thinking of the next 3 years, how do you think demand for hedge funds or funds-of-hedge funds will change among mass market investors?
- Table 14: Thinking of the next 3 years, how do you think demand for hedge funds or funds-of-hedge funds will change among high net worth investors?
- Table 15: Thinking of the next 3 years, how do you think demand for hedge funds or funds-of-hedge funds will change among institutional investors?
- Table 16: Thinking of the next 3 years, how do you think demand for hedge funds or funds-of-hedge funds will change among the following customer groups, approximate weighted average
- Table 17: Thinking of the following customer groups, what do you think will be the major barriers to wider take-up of hedge funds or funds-of-hedge funds in the next three years?
- Table 18: Thinking of mass market customers, what do you think will be the major barriers to wider take-up of hedge funds or funds-of-hedge funds in the next three years?
- Table 19: Thinking of high net worth customers, what do you think will be the major barriers to wider take-up of hedge funds or funds-of-hedge funds in the next three years?
- Table 20: Thinking of institutional customers, what do you think will be the major barriers to wider take-up of hedge funds or fund-of-hedge funds in the next three years?
- Table 21: Fees linked to performance of hedge funds will become more common
- Table 22: The hedge fund industry needs more regulation
- Table 23: The hedge fund market will see significant consolidation
- Table 24: Hedge funds need to become more transparent if they are to attract greater levels of investment
- Table 25: What do you think is the key success factor an asset manager must have to succeed in the high net worth market for hedge funds or funds-of-hedge funds?
- Table 26: Responses to the statement: Hedge funds cannot guarantee absolute returns
- List of Figures
- Figure 1: The UK dominates the market for hedge fund management in Europe H1 2005
- Figure 2: IFAs are key in distributing hedge funds or funds-of-hedge funds to mass market investors across Europe
- Figure 3: The UK is the largest of the "big five" European markets for hedge fund assets held by investors, 2004e
- Figure 4: The UK dominates the market for hedge fund management in Europe H1 2005
- Figure 5: European equity is the most important investment class for European hedge funds managers
- Figure 6: GLG overtook Man Group and Vega AM to become the largest fund manager in Europe in 2004
- Figure 7: Institutional investors are seen to be the core market for hedge funds in Europe, closely followed by HNW investors
- Figure 8: There are limited differences is which customer groups are seen as key targets for hedge funds in different European geographies
- Figure 9: European hedge funds believe institutional clients offer the greatest potential for the hedge fund industry, 2005
- Figure 10: Fund of fund managers represent the biggest institutional target for hedge funds
- Figure 11: Almost 80% of Europe's asset managers feel that funds-of-hedge-funds are the most suitable way of providing investors with hedge fund exposure
- Figure 12: IFAs are key in distributing hedge funds or funds-of-hedge funds to mass market investors across Europe
- Figure 13: Private banks and wealth managers are the favored channel for distributing hedge funds and funds-of-hedge funds to HNW investors
- Figure 14: Direct sales are the most popular option for distributing hedge funds or funds-of-hedge funds to institutional investors
- Figure 15: Germany is set to overtake France as a market for hedge fund investment, 2004e-2009f
- Figure 16: Demand for hedge funds or funds-of-hedge funds from mass market investors looks set to soar in Spain over the next three years
- Figure 17: Demand among HNW investors is expected to remain strong, although there is some potential for decline in the UK market
- Figure 18: The institutional market for hedge funds and funds-of-hedge funds is expected to show strong growth across Europe for the next three years
- Figure 19: Spain is expecting the strongest growth in hedge funds and funds-of-hedge funds across all client segments
- Figure 20: Regulatory difficulties surrounding hedge funds are a clear concern across all client groups
- Figure 21: Regulatory issues surrounding hedge funds and funds-of-hedge funds are a significant concern for Spanish asset managers
- Figure 22: Opinions on the necessity of further hedge fund regulation differ substantially across Europe
- Figure 23: More than 70% of Europe's asset managers believe that the hedge fund market will consolidate significantly
- Figure 24: Increased transparency is necessary to boost investment in hedge funds
- Figure 25: Performance fees on hedge funds are expected to become much more common, 2005
- Figure 26: Past performance, brand and strength of distribution are important for asset managers to succeed in the HNW market for hedge funds
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