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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Hedge funds are adapting to fee compression below traditional two and twenty levels while navigating challenging H1 2025 performance amid trade policy volatility. Listed derivatives liquidity remains stable despite macro headwinds."
This quarterly survey of the Acuiti Hedge Fund Expert Network reveals an industry in transition across multiple dimensions. Fee structures continue evolving away from the traditional two and twenty model, with 41% charging 2% management fees but a higher proportion charging less, particularly in the 1-1.49% range. Performance fees remain more stable at 20% or higher. The first half of 2025 proved challenging, with 42% of members underperforming an average H1 and 50% missing budget targets. Trade policy uncertainty, particularly April tariff volatility and ongoing US trade policy direction changes, has disrupted systematic trading strategies. Despite macro headwinds, listed derivatives liquidity remained generally stable, with 55% reporting unchanged conditions and 34% seeing improvements. Looking ahead, the SEC Treasury clearing mandate presents implementation challenges around costs and operational complexity. Most funds plan to maintain current fee structures, though flexibility in negotiations continues. The industry faces a complex environment balancing regulatory compliance, fee pressure, and trading strategy adaptation amid policy uncertainty.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
Moderate conviction shown through specific survey data and clear industry trends, though the document is more observational than decisively positioned on future outcomes.
Growth Outlook
The document reflects a cautious to slightly negative market outlook, with 42% of funds underperforming in H1 2025, challenges from trade policy uncertainty, and mixed prospects for liquidity conditions over the next 12 months.
Risk Appetite
Risk appetite appears somewhat defensive, with funds adjusting trading strategies in reaction to liquidity conditions by reducing position sizes, and a third reporting liquidity risk becoming a bigger factor in risk models.
Capital Deployment
No specific information about capital deployment changes or cash level movements is provided in this industry survey document.
Forward Guidance
Forward guidance is neutral with mixed signals - while most funds plan to maintain fee structures, there's uncertainty about liquidity prospects and ongoing challenges from regulatory mandates and policy volatility.
Language Signal
Language signals are slightly negative with references to 'challenging period', 'underperformance', 'difficulties', and 'concerns' about costs and complexity, though balanced by some positive liquidity assessments.
Perceived Risk
Moderate to high perceived risk given explicit concerns about trade policy uncertainty, regulatory compliance costs, operational complexity from clearing mandates, and liquidity risk becoming a bigger factor in risk models.
Opportunity Density
Below-average opportunity density implied by widespread underperformance in H1 2025, challenges in building new trading models due to policy uncertainty, and mixed outlook on market conditions.
Time Horizon
Medium-term focus evident in discussions of structural fee changes, regulatory mandate implementation timelines, and 12-month liquidity outlook assessments.
