"Respondents are concerned that excessive regulation may result from President Obama's June 17 announcement of planned regulatory reform that would include a requirement that hedge fund advisors register with the SEC and adhere to new requirements for record keeping, disclosure and reporting," said Jeffrey Yager, co-leader of RSM McGladrey's financial services practice.
The survey also indicated openness to more regulation, as hedge fund managers appear ready to work with President Obama's team to craft reasonable regulation moving forward.
When asked if they believed the SEC's regulatory oversight authority was sufficient, 42 percent of respondents noted that the agency needs additional authority, while 50 percent believe the SEC's oversight is sufficient but the SEC needs additional funding to be more effective.
Optimism for the Industry
The RSM McGladrey survey found that 60 percent of more than 100 respondents believe the current economic environment presents more investment opportunities than challenges. Hedge fund managers are optimistic that the market will improve late in 2009 or early 2010, providing them and their investors with new opportunities.
Cleaning up the Economic Mess
Among respondents, 69 percent express optimism that the U.S. economy will return to positive growth by the second quarter of 2010. A majority (56 percent versus 41 percent) believe that the private sector, not the public sector, will be responsible for cleaning up most of the problems in today's financial system.
Respondents pointed to declining profits, fewer worthwhile investments, redemptions and lack of access to new asset inflows, in that order, as indicators of the impact of the economic crisis on their firms. With regard to redemptions, 65 percent of respondents expressed either major or minor concern about them. When it comes to risk taking, 56 percent of respondents said their risk appetite has declined, from a lot to a little (44 percent said they maintain the same risk appetite as before the economic crisis began).
On the other hand, 88 percent of respondents to the RSM McGladrey survey remain bullish about their ability to retain their top talent, while 87 percent note their firms are not planning to adjust their equity plans or rework their hurdle risks and 91 percent do not have liquidity concerns about their fund. Important for investors, 83 percent are not planning to seek lockup periods for new investors.
While not ignoring the wide range of evident threats to their businesses and the hedge fund industry as a whole, hedge fund managers as a group, by almost two-to-one, express optimism that the current economic environment offers more investment opportunities than challenges.
RSM McGladrey's Yager said, "Like President Obama, the hedge fund community remains optimistic about the future of the American economy and the opportunities it will present for investors and the financial services firms who allow them access to the marketplace. The hedge fund industry is likely to contribute to making the economy emerge stronger in the long run. The key is for financial professionals and government regulators to work together toward a shared goal of increased transparency and economic growth and opportunity."
Performance of Government Leaders and Institutions
Survey respondents were asked to rate key people and organizations on a 10-point scale, with 10 classified as "excellent" and 1 classified as "poor."
President Obama (61 percent) received a rating consistent with his approval numbers in recent national polls. Other noteworthy rankings include:
Higher poll approvals:
- The Federal Reserve (78 percent)
- Ben Bernanke, Federal Reserve Chairman (75 percent)
- FDIC (78 percent)
- Sheila Bair, FDIC chairman (67 percent)
Lower poll approvals:
- Larry Summers, National Economic Council Director (53 percent)
- Timothy Geithner, Treasury Secretary (51 percent)
- OMB Director Peter Orszag (34 percent)
