Managed Accounts: The New Normal? (Barclays Capital’s Capital Solutions Group)

Capital Solutions Group • July 2011

KEYWORDS: Managed Accounts, Liquidity, global financial crisis, Institutional Investors

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  • Produced by Barclays Capital’s Capital Solutions Group

Summary:

In this edition of the Hedge Fund Pulse, the Strategic Consulting team examines the current Managed Accounts (MA) landscape. At the peak of the global financial crisis in the fourth quarter of 2008, numerous investors in HFs found they could not redeem their LP investments for cash in the time frame they had expected. This happened either because other investors had been quicker to put in their redemption requests and the managers had since raised gates to prevent distressed selling of assets, or because the liquidity profile of the underlying assets was no longer consistent with the liquidity terms of the HF, or both. This highly sensitized investors (most institutional) to the co- investor risk they are exposed to as investors in commingled funds. Additionally, fraud cases such as the Madoff ponzi scheme also prompted institutional investors to reconsider their approach to investing in HFs. MAs, despite having been around for years, seemed to provide the answer many investors were looking for. While the stampede towards MAs has moderated significantly since the early days of 2008 and 2009, MAs continue to be popular with a segment of investors, and managers are more inclined to offer these now than before. Prompted by these developments, we decided to examine the current landscape, and delve into five key facets of MAs in this paper.

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