- Managers on average spend 45% of their management fees on middle and back office
- Eight out of ten managers polled considered that investors are placing more emphasis on the back and middle office
- Where over 70% of a manager's clients are institutional, the proportion spent on corporate control increases significantly.
George Cadbury, President, PCE Investors said, "The landscape of managing a hedge fund business has become more complex. Investors are now driving the need for pertinent risk controls, efficient operational systems and studious compliance in a way that has not before been witnessed. Managing the associated costs, however, are as important as managing the portfolio. PCE simplifies the complexities of running a fund business, enabling managers to focus solely on alpha generation."
Andrew North, Principal Advisor, Investment Management, KPMG LLP commented, "Managers are increasingly looking to move to a more variable cost model, geared to activity or performance. Outsourcing can achieve this and give managers the freedom to 'stick to their knitting' and concentrate on performance." North continued, "The portfolio of services managers are comfortable outsourcing is expanding; moving from traditional fund administration and IT, into the middle and back office as well as business support functions such as compliance."
The survey was commissioned from KPMG by PCE Investors and each participating manager took part in a face-to-face interview and completed a questionnaire. The participants were based in London and have a combined AUM of $13bn with a significant proportion under $1bn. The survey looked at the structure of the cost base of small-to-medium sized hedge funds in the current market, and explores their appetite for outsourcing and also where costs are expected to change in the future.