Oct 29, 2015
From the KPMG Institutes
The hedge fund industry is changing, with institutional investors, in particular pension funds, becoming an increasing proportion of assets under management. How investors access hedge funds is changing. Institutional investors are demanding improved transparency and customization. Customizing the investment mandate and commercial terms is sought to ensure allocations complement investors’ wider portfolios. Managed accounts are the key to this evolution within the hedge fund industry.
Definition of managed accounts
We define managed accounts as segregated accounts that are owned and controlled by the investor, with investment decision-making delegated to an appointed hedge fund manager. Our focus is on managed accounts at the hedge fund level (i.e. where the underlying investments in instruments and securities are made). The term ‘managed account’ can also be featured at the portfolio of hedge funds level, where a fund of hedge funds manager constructs a custom portfolio (the managed account) of underlying hedge funds — commingled funds and/or managed accounts. While a number of the areas discussed in this paper are relevant to this type of managed account, it is not its primary consideration.
Managed accounts are used by investors on the ‘buy side’, with the investor driving the setup of the mandate and the operational support providers. The ‘infrastructure providers’ are typically third-party firms who are agnostic to the hedge fund manager and the institutional investor, and they focus on supporting the operational needs of institutional investors to effectively and efficiently run managed accounts within a diversified investment program.