Multi-managers remain at the forefront of investors’ minds despite rising performance fees not seen since 2016, according to a recent (December 2023 - January 2024) BNP Paribas Capital Introduction survey on alternative investments.[1] The 238 participants of the survey manage or advise on $1.2 trillion in hedge fund assets and represent around a third of the industry. [1]
The rise in fees is often rationalized by the vast nature of the multi-manager operating model that enlists various portfolio managers in the investment strategy of the investor’s fund, aiming to balance returns and risk. The growing pressure to continue to reliably make money forces firms to ensure they have the best talent in an environment with a limited talent pool.
The Talent Arms Race
Top multi-manager talent is often compared to aggressively recruited professional athletes, who receive signing bonuses and profit percentages. The cost for exceptional talent is usually not covered by the traditional “two and 20” fee structure. Instead, firms use a “pass-through” model, where investors pay for most of the firm’s operating expenses, with fees rising as high as 7%.[2] This is not a point of contention for investors, as the results continue to be strong.
However, 2023 proved that returns in the multi-manager space are not guaranteed at the growing rates that investors have become accustomed to, with the Multi-Strat Index gaining a mere 5.4% while the S&P 500 rose 26%.[2] This dip in performance will potentially create challenges for newcomers. Still, despite rising fees and a dip in performance, multi-managers remain in the spotlight as an attractive opportunity with top-of-the-line, specialized portfolio management.
How SS&C Advent’s Geneva® Supports Multi-managers
SS&C Advent’s Geneva offers full support for multi-managers to operate smoothly in this complex environment. Being much more than a real-time portfolio management and accounting solution, Geneva can also:
- Support swaps, equities, futures, and forwards
- Include functionality that can view books by portfolio manager and custodian
- Natively allocate expenses seamlessly through a robust expense fee calculator and allocator
Removing nearly all manual processing through built-in functionality, Geneva simplifies the streamlining of swap and equity lifecycle events and allows firms to natively accrue and generate cash flows for all investment types without workarounds. Leveraging Geneva with Managed Services, we will handle the day-to-day tasks of hosting and managing software or operational workflows, including reconciliation with administrators and prime brokers.
When leveraging Geneva, multi-managers can focus on opportunities and strategies to generate profits for their clients without worrying about significant operational pressures.
To learn more about Geneva, contact us or request a demo.
[1] Stockmeier, C., & Mendonca, L. (2024, February 12). 2024 Alternative Investment Survey: Great Expectations. BNP Paribas. Retrieved February 14, 2024, from https://globalmarkets.cib.bnpparibas/2024-alternative-investment-survey-great-expectations-investors-bet-on-alpha-in-the-new-rates/
[2] Alpert, B. (2024, January 24). How the Best Hedge Funds Are Smoking the Competition. Barron's. https://www.barrons.com/articles/multistrategy-hedge-funds-podshops-annual-returns-634dd7a4
