It’s not just about the money anymore. Now hedge fund managers are looking for a legacy.
Many top hedge fund managers aren’t well-known outside the hedge fund industry, and as they age they want to create a legacy with a ’40 Act fund, said Jon Sundt, chief executive of Altegris Advisors.
“They want a brand that outlives them,” said Sundt, who gave an update on the alternatives market to attendees at the American Banker's Association’s Wealth Management and Trust Conference in San Diego on Thursday.
Look at Marketfield Asset Management, he said, which manages $13 billion and subadvises the popular Mainstay Marketfield Fund. Five years ago, prior to the open-end fund’s success, “Marketfield was a nobody,” Sundt said.
This desire by hedge fund managers to make a name for themselves is fairly recent. “Two years ago, [hedge funds] weren’t interested” in a liquid fund, he told Financial Advisor in an interview.  But “now they want significance.” They don’t just want to quit and abandon employees and investors, either, he said.
Hedge funds are also using less leverage compared to before 2008, so they’re looking more like mutual funds, Sundt added. “They don’t want surprises.”
“Liquid alternatives are absolutely a growth area,” agreed Bill Crager, president of Envestnet Asset Management. “Large hedge fund firms are talking about it.”
Driving the attractiveness of a liquid fund for managers is a more competitive institutional market with more stringent due diligence, Crager said. Plus, the overall growth in investors assets together with more being allocated to alternatives makes the market alluring to hedge funds.
But the move to retail distribution is difficult, Crager said. Unlike dealing with a relatively few number of huge investors, retail channels “are like confetti,” he said, and it will take an educational and marketing effort for hedge fund managers to build the brand position they want.