Hybrid funds are proliferating. Here’s a quick rundown who’s launching these funds, and who they’re targeting.
In vogue
Share of firms that have launched a hybrid fund
As a starting point, it’s clear these funds are here to stay, and grow. A fifth of all our survey respondents this year have launched a hybrid fund, with another 35% planning to do so in the next 12 months.
One can expect solid penetration through the remaining 45% by next year too, as conversations with industry advisers suggest evergreens are all the rage – some fund formation experts suggesting as many as half of all new launches are hybrid structures.
Game of scale
Hybrid fund launches – by firm size
It’s widely cited that mega funds – having saturated the institutional landscape – will make their next trillion from wealth and retail investors.
That could be one reason why larger firms seem more prone to launching hybrid funds. Another could just be the sheer operational demands brought by these funds – with liquidity gating and an intensifying frequency and format of pricing.
The 401k play
Share of firms targeting retail investors with their hybrid funds
The race is on for firms in the US to tap into that $12tn – most are rushing to position themselves, many are waiting more regulatory clarity. At any rate, the floodgates will burst open soon, as is borne true in our data.
By comparison, the UK and Europe remain focused on wealth and institutions when it comes to marketing hybrid funds. The latter are increasingly interested in the efficiency of capital deployment and bypassing the need to re-up periodically, the former are happy to sacrifice an extra point or two of IRR for liquidity.
