Unique Opportunities for Investors
Brighton House Associates research analysts have been taking the pulse of the investor community for the last two years. During this time, thousands of relationships have been developed with sophisticated investors both domestically in the U.S. and internationally. As the financial landscape has transformed, BHA analysts have strived to capture the essence of investor sentiment. Some investors are nervous and apprehensive while others remain confident that better times are ahead. One of the most recent trends noticed among BHA analysts is that investors are excited by the unique circumstances allowing them to “upgrade” their managers.
The global recession has created rare opportunities for investors. The balance of power has shifted from managers to investors, as institutional and private clients alike demand lower fee structures, favorable liquidity terms, and unprecedented levels of transparency. The largest names in the industry, including those that have been turning away investors from their exclusive funds for years, have not been immune to the liquidity crunch that has resulted in numerous redemptions. Coupled with negative returns for 2008, these managers are forced to reopen these elusive funds to new capital.
A prominent multifamily office based in the U.S. felt that the current economic conditions have created a once-in-a-lifetime opportunity to add truly world-class managers to its already impressive stable. A Canadian corporate pension plan with a 35 percent target allocation for alternative investments has already laid out its plans for the first half of 2009; it is focused on upgrading its hedge fund investments to billion-dollar, previously inaccessible funds.
Investors have recognized this intriguing and perhaps limited window of opportunity to add managers with exceptional skill and experience to their portfolios. These managers are in the enviable position of accepting new subscriptions that, hopefully, will fuel their success in the coming year.