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2013 Business Expense Benchmark Survey
Intro & Methodology
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Provides an independent set of industry metrics
that allows a hedge fund to make better budgetary
decisions at both the management company and
fund levels, with a specific deep-dive focus on the
expense impact of global industry regulations
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Informs the strategic direction of the investment
manager with regard to their own growth by enabling
the investment manager to better understand the
maturation of the industry. This insight is possible
through analysis of expenses across various hedge
fund segments, exploring differences by both firm
size and region
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Allows firms to adjust both their marketing
to investors and responses to due diligence
questionnaires by gaining a better understanding
of their own positioning around internal and fund-
level expenses. This insight is gleaned via analysis
of expenses across functions within each hedge
fund segment
What’s new in 2013
The prior year’s report explored the effect of
compensation and non-compensation related
expenses on firms across four different size bands.
This year, our augmented dataset enables us to
analyze how non-compensation expenses are
allocated to both the fund and the management
company, while also enabling us to break responses
into six different AUM bands at both global and
regional levels. Further data was collected on fund
strategy and vintage (basedon the year the investment
management firm was founded). This information is
maintained by the Citi Business Advisory team, but is
not explicitly explored within this report.
This cross-AUM expense analysis allows us to delve
into the implications of asset growth, which provides
insight into the effect on firm profitability at the
different assets under management levels. This
insight is then extended on a regional basis, such that
differences in expense profiles among the Americas,
EMEA and APAC regions can be explored in detail.
Finally, this year’s online questionnaire asked
respondents to provide budgetary information
around addressing an array of global hedge fund
regulations. They were also asked to opine on the
level of effort that will be required of their existing
staff in meeting these regulations. Lastly, we asked
respondents to tell us which functions would require
new hires in the coming year as a direct result of
the increased regulatory burden on the hedge fund
industry. We explore their answers –broken down by
size and region – in a deep-dive regulatory expense
impact section.
Data Collection
Our online questionnaire was sent to hedge fund
firms globally. Responses have been anonymized,
aggregated and analyzed by Citi Prime Finance’s
Business Advisory team and stored in our proprietary
expense database. Profile questions categorized
respondents by AUM size, region, strategy, and
vintage. Information on firm headcount was provided
at a detailed functional level, and compensation was
provided at a more-aggregated functional level. Note
that compensation information was not collected
for the investment management function due to the
variable nature of such remuneration, which is highly
correlated to the performance of each hedge fund.
For similar reasons, other profit-related analysis
within this report is centered around management
fee collection, as the performance-based revenue is
highly variable from fund to fund as well as year-to-
year. Non-compensation or “third-party” expense
information was collected for consistent functional
categories across both management company and
fund levels.
To ensure that our questions conform to a common
framework that can be applied to hedge funds of
different sizes, strategies, and regions, we have again
used our hedge fund functional architecture. The
elements of this functional framework provide insight
into the detailed expense questions that we asked
of hedge funds. The individual questions were then
Welcome to the second annual Citi Prime Finance Hedge Fund Business Expense survey. This
comprehensive, global report builds upon last year’s findings, allowing us to provide deeper insight
into the expenses associated with running a hedge fund. The detailed expense analysis in this paper
provides the hedge fund management firm with three major benefits: