Deloitte 2018 Hedge Fund Symposium Executive Summary

Ten years of hedge fund industry exploration

Over the past decade, the Deloitte Hedge Fund Symposium has become a highly anticipated industry event for senior industry executives to confirm their current course or chart a new one. This year was no exception. Our 10th annual Hedge Fund Symposium was particularly illuminating on a few critical fronts:

• The likely track of the economy over the coming 24 months
• The future of data in investment decisions
• Changing talent needs in an increasingly competitive marketplace
  

We encourage you to explore our executive summary of highlights from the afternoon’s presentations and candid conversations. We hope this content proves useful as you continue to develop your business strategy in the coming year, and we welcome the opportunity to further discuss with you how Deloitte can help you navigate to true north.

On the horizon: 2020 foresight

Market decline was the backdrop for this year’s symposium and a source of both concern and optimism.

Danny Bachman, US Economic Forecaster for Deloitte Insights and a member of The Wall Street Journal’s panel of economists, cautioned that recent government policy has lifted gross domestic product but will likely subtract from growth by late 2019, adding that uncertainty around interest rates, trade, and US politics also darken the outlook.

On the upside, uncertainty continues to make hedge funds an attractive investment, and the next 12-24 months are shaping up to be an investing environment that historically favors the hedge fund industry. After some high-profile hedge fund lapses during the market tumult of October, the onus will be on the industry to show it can generate differentiated returns.

Data assets: Finding the value

Data discussions ranged from standards for data quality and authentication to cloud computing for analyzing data.

Hedge funds are achieving mixed success with turning data into actionable investing strategies. “It’s too easy to get dazzled by the proliferation of data and forget what you are trying to accomplish,” said one hedge fund representative on the symposium’s data-focused panel. “You need to always remember the business problem you are trying to solve.” Weather data alone is interesting, he continued, but when paired with satellite images of parking lots before and after hurricanes, you get a sense of how retailers are doing.

With everyone turning to data, much of it is becoming table stakes. We’re entering the landscape of “truly differentiated data that’s not commercially available and is still very difficult to find,” said one participant on the panel. The head of proprietary research at a large hedge fund manager predicted that in 10 years, data will be actively traded on exchanges like stocks.

Man + machine

No matter how good your data is, you need the right capabilities to turn it into alpha.

“We talk a lot about data, but it’s just research using data as an input, right?” asked one speaker from the industry. “We’re believers that this movement will be about man plus machine. We don’t think this will be a fully automated process. That means you still need to have the right process and people to make sense of it, and there are big challenges inherent with that.”

The industry’s evolution requires a new breed of talent: Data science is becoming a key job requirement, along with the ability to program and be creative. The intersection of technology and talent has large asset managers adding their first chief technology officers to direct programmers and ensure they are asking the right questions around technology solutions.

As one generation makes room for the next, leadership succession is also finally starting to get the attention it deserves, said Joe Fisher, a partner at Deloitte & Touche LLP and audit leader of the US Investment Management practice. “Roughly 25 percent of alternative asset management founders are over the age of 65, and approximately 42 percent are between the ages of 55 and 65,” Fisher said. “This has propelled many large alternative asset managers to unveil their succession plan.”

Looking ahead

The industry faces many challenges which will require the ability to adapt, but we believe the best days are ahead. Those leading the charge these days share a rare blend of resources, intellect, and curiosity. That’s a powerful combination for managing such an unprecedented period of change, and we anticipate it will propel this industry forward.

We encourage you to read our full executive summary of this year’s symposium and we look forward to working with you over the year ahead.