Unlocking the Hedge Fund Opportunity Set

Accessing top hedge funds is tougher now, with over a third of flagship funds closed to new money. This constraint is particularly acute in quant, macro, and multi-strategy funds, driven by recent strong performance and fundraising. Importantly, smaller boutique managers with under $5 billion AUM show comparable returns to larger peers, suggesting talent isn't the issue.

Implementation terms have also tightened. Average fees have climbed since 2019, and managers are increasingly using pass-through expense structures. Liquidity terms are more onerous, with investor-level gates extending redemption times to an average of 27 months, up from seven.

To navigate this, allocators should cast a wider net across fund types, access points like SMAs and co-investments, and fund vintages. Structuring exposures effectively, beyond just manager selection, can be a competitive advantage. This involves leveraging relationships and operational capabilities to secure access on suitable terms and at scale.