Opinions of the Hedge Fund Community

Research Conducted Exclusively by RSM McGladrey

Thursday – June 25, 2009

Table o Contents

Forward .......................................................................................3Executive Summary .....................................................................3Detailed FindingsBaseline Opinions ..................................................................5Market Predictions.................................................................6Economic Growth ..................................................................7Government Perormance .....................................................8Government Involvement ......................................................9Impact o Economy on Hedge Funds ...................................11Future Market Opportunities ................................................14Participating Demographics ........................................................15Methodology ..............................................................................15About RSM McGladrey and McGladrey & Pullen .......................16Contact inormation ....................................................................16

|Opinions of the Hedge Fund Community:Research Conducted Exclusively by RSM McGladrey

Forward

On behal o the proessionals at RSM McGladrey andMcGladrey & Pullen, welcome to our inaugural Hedge FundIndustry Survey. We recognize the industry’s ability to spurinvestments and assist in the strengthening o the nationaleconomy and acknowledge the unprecedented changes acingus as proposed government regulation works its way throughCongress. Prior to the announcement o these proposedchanges, RSM McGladrey engaged the noted opinion researchrm Penn, Schoen & Berland Associates (PSB), to give voice tothe opinions, concerns and insights o hedge und managersand senior executives in a lengthy survey with 102 respondentsconducted between May 20 and June 4, 2009.This survey is part o our ongoing commitment to the hedgeund industry. McGladrey’s dedicated Financial Services GroupPractice is one o the largest and most experienced practices inthe country, providing audit, tax and business consulting solutionsto more than 1,200 hedge unds/investment partnerships, und ounds, investment advisors, broker-dealers and uture commissionmerchants, including more than 300 private equity groups.We will continue to provide our perspective on how currentevents continue to impact the hedge und industry rom agovernance, structural, regulatory and nancial perspective.We hope you will nd the results interesting and that thendings will encourage discussion and dialogue between theindustry and its various publics. Please eel ree to contact usand share your ideas and comments.Regards,Kislay (Sal) Shah, CPASimon Lesser, CPA

Executive Summary

When the denitive chronicle o the global nancial crisis issomeday written, Wednesday, June 17, 2009, may be lookedback on as a sort o D-Day or hedge unds. On that day, theObama Administration announced a proposal to restructure theU.S. nancial regulatory system that has prospered or yearswith minimal government scrutiny or oversight. This series omoves, news reports suggest, could have both an indirect anddirect eect on the hedge und industry. Not only will undshave to register under the president’s plan, the proposal will givethe Federal Reserve new oversight powers and give the govern-ment the ability to unwind nancial institutions that may posesystemic risk including – potentially – to some hedge unds.Faced with changes to how they may have to operate and usetheir capital and liquidity, hedge und managers – and theircustomers and other stakeholders – are bracing or sweepingchanges that will be rolled out in the near uture.Against the looming specter o these changes, RSM McGladreyworked with the noted opinion research rm, Penn, Schoen &Berland Associates (PSB), to tap into the opinions, concernsand insights o hedge und managers and senior executives in alengthy survey with 102 respondents between May 20 and June4, 2009. Indeed, as the data indicated, oremost on their mindswas not another headline-grabbing scandal that has markedcoverage o the investment industry since the arrest o BernardMado on Dec. 11, 2008. Instead, the industry is most con-cerned about how the proposed regulations will develop in thecoming weeks and months.The respondents in this study are, undamentally, optimists,but not blindly so. They note how the economic downturn hasaected them, in many cases severely, but they see, long term, asilver lining that comes with any undamental “reset” o an eco-nomic system. Benets will come, they believe, to those who areresilient enough to work through the current downturn and takesmart, calculated risks to capitalize on the upheaval. I they canonly determine the best path orward to operate under increasedgovernment regulation, they see signicant opportunity ahead.

Opinions of the Hedge Fund Community:Research Conducted Exclusively by RSM McGladrey |