06Jun

After seeing investors move their money out of hedge funds for nine consecutive quarters, Bloomberg says better times for the industry are right around the corner.

The prediction comes from a Bloomberg Mandates survey of 50 institutional allocators with more than $500 billion in assets. Half of them said they have or plan to increase their investment in hedge funds.

Reporting on the results of the survey, Boomberg.com said, “The industry emerged as the top pick among six major alternative asset classes, followed by private debt. About 60% of those surveyed said they were re-jiggering their investments as a result of the market turmoil.”

That’s good news for managers. Hedge funds have been struggling for several years just to stay even with market indices. In the first half of this year, Hedge Fund Research reports that on an asset-weighted basis, the industry lost 7.9%.

However, Evestment said average hedge fund returns in June were positive by 2.07%. That improved the average half-year return to a minus 3.37% for the industry as a whole. By comparison, the S&P 500 was off 3.08% at mid-year, according to Evestment data.

A Credit Suisse survey released at the end of June found that among the 160 institutional investors it surveyed, hedge funds were strongly favored among the 10 major asset classes. At 32%, net demand — the percentage of investors increasing allocations less the percentage decreasing – was the highest in the last five years.

Joseph Gasparro, Credit Suisse’s, head of Americas capital services content, suggested that the renewed enthusiasm for hedge funds is being driven by the market uncertainties as evidenced by the vacillation in the S&P.

“The incredible run-up in equities from late March to early June, the ‘easy money’ if you will, is likely not going to repeat,” Gasparro told Bloomberg. “The environment going forward will include more uncertainties, with investors relying on hedge funds to help navigate.”

In the Bloomberg Mandates survey, 60% of those surveyed said they were reallocating their investment mix because of the market turmoil. Bloomberg said long-short equity was the most popular hedge fund strategy. Funds-of-funds was the least popular.

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Green Key

COVID-19 Is Teaching Accounting to Get ‘Comfortable With the Uncomfortable’

In the post-pandemic world, life at successful accounting firms will be very different from what it was just last year.

Partners will be more mentor than boss, engaging with staff in a more personal way than ever before. There will be a new emphasis on leadership and development. The consultative part of accounting will be center stage, as clients look for guidance and help in rebuilding their business. Technology adoption will be quicker and remote work will be an accepted practice.

Those predictions are the perspective of a group of accounting thought leaders interviewed by AccountingToday’s editor Danielle Lee.

“The pandemic is giving firms a reason to embrace change like never before,” Marc Rosenberg, president of The Rosenberg Associates, told Lee. “Why? Because they have (or will have) no choice. Life at CPA firms as we knew it pre-pandemic will never return. Normal is gone.”

With everyone working remotely, Angie Grissom, president of The Rainmaker Companies, said firm leaders are learning just how resilient their teams are. “A newfound confidence in the agility of teams will emerge,” she says.

The more progressive firms began embracing remote work long before anyone ever heard of COVID-19. Now the rest of the profession is discovering people can be as productive – or more – working remotely, which will lead to fewer hiring restrictions, says Jeff Phillips, CEO of Accountingfly.

“Some of your best people are not ever going to return to an office again, and I hope firms learn that’s OK,” he said. “If they learn that lesson, they’ll realize they can solve their own war for talent by quickly and easily hiring remote A-player talent based anywhere in the U.S.”

As the economy opens up and people return to work – millions already have – talent retention and training will be critical to firm success. Partners now “Need to be much more deliberate and planful about keeping in touch with staff, not only regarding their client work but their training, development and morale,” says Rosenberg.

Adds Sandra Wiley, president of Boomer Consulting, “As firms develop their strategies over the next few months, they should have a laser focus on talent retention and upskilling, process improvement, technology infrastructure, and new services for growth in the advisory area.”

Even the business model should be up for reconsideration, suggests Ron Baker, founder of the VeraSage Institute. “If you are still hourly billing, your firm is mired in a transactional relationship with your customers based upon inputs, and those are easy to sever when times are tough.”

More directly, Boomer Consulting’s L. Gary Boomer, says, “The existing business model does not meet the needs of most clients or firms. You should move to the subscription model in order to attract new business and retain existing clients. Value can be created through packaging and pricing.”

“Now is a great time to learn or change a habit,” he advised.

Summing up, Jody Padar, vice president of strategy at Botkeeper, declared, “We can’t go back to the way things were, so we need to get comfortable with the uncomfortableness we face.”

Photo by Dillon Shook on Unsplash

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Green Key

PwC Is Again the ‘Most Prestigious Accounting Firm’

And the award for the “Most Prestigious Accounting Firm” goes to… wait for it… PwC.

It’s the 12th straight year the US branch of the international accounting and business services firm

PricewaterhouseCoopers International has placed first on the annual list of the top 50 prestigious firms.

Produced annually by careers site Vault, the rankings are based on some 10,000 surveys completed by accounting professionals. Among the questions, participants give a prestige ranking to firms other than their own.

From year to year, the firms making the top of the list haven’t varied much. This year’s rankings (for some reason Vault dates the list as 2021) are largely a repeat of last year’s with the big four accounting firms taking the top four places: 1-PwC; 2-Deloitte; 3- EY; and, 4-KPMG.

In fact, most of the firms on the list were there last year. Joining the list this year are Frazier & Deeter in 45th place; Warren Averett 47; and, Squar Milner 50.

What’s particularly striking about PwC is how it dominates Vault’s other lists:

  • #1 on the 2021 Vault Accounting 50
  • #2 on the 2021 Best Accounting Firms for Diversity
  • #1 in each of the three categories on the Best Practice Areas list.
  • Multiple rankings among the top 5 and 10 in the various categories on Vault’s 2021 Best Accounting Firms

So often rated so highly on these Vault lists that in reporting on the list released last week, the irreverent accounting blog GoingConcern suggested, “Vault might as well call it the PwC Most Prestigious Accounting Firm Award at this point.”

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