Fund Of Funds Business Is Still Dying

The fund of hedge funds business – the manager of managers, hedge funds that invest in other hedge funds -- has witnessed significant growth from 200 to 2008 as well as a leveling off of hedge fund inflows, a May Eurekahedge report notes. From its participation peak in 2007, when over 3,700 individual fund of funds shared over $800 billion in assets under management, the 2017 landscape sees near 1,800 fund of funds, with smaller funds bearing the brunt of the reduction. The overall Hedge Fund of funds business has seen significant asset declines while investments in the underlying managers has risen.

Asset declines: $46.4 billion pulled from Hedge Fund of funds
In 2016, investors pulled $46.4 billion from fund of funds investment structures as the Eurekahedge Fund of Funds Index lost -0.12% on the year, underperforming their hedge fund and long-only counterparts who gained 4.50% and 7.65% respectively.

“Recently investors have questioned the viability of investing into a funds of hedge funds given single digit returns from underlying hedge funds and the double fee structure inherent to the multi-manager model,” the Eurekahedge report noted, pointing to competition from liquid alternative products and hedge fund replication products, some of which are categorized as “smart beta.”

The fund withdrawal has hit smaller funds without significant negotiation power or advanced technical prowess the hardest. “Investors have increasingly shunned the smaller funds of hedge funds and sought direct exposure into hedge funds instead.” To wit, 98% of the fund of funds that closed their doors managed less than $500 million in assets.

 

SORRY!

This content is exclusively for paying members. Sign up here

If you are subscribed and having an account error please clear cache and cookies if that does not work email support@valuewalk.com or click chat


X
Saved Articles
X
TextTExtLInkTextTExtLInk

The Life and Career of Charlie Munger

Charlie is more than just Warren Buffett’s friend and Berkshire Hathaway’s Vice Chairman – Buffett has actually credited him with redefining how he looks at investing. Now you can learn from Charlie firsthand via this incredible ebook and over a dozen other famous investor studies by signing up below:

  • Learn from the best and forever change your investing perspective
  • One incredible tidbit of knowledge after another in the page-turning masterpiece of a book
  • Discover the secrets to Charlie’s success and how to apply it to your investing
Never Miss A Story!
Subscribe to ValueWalk Newsletter. We respect your privacy.

Are you an intelligent investor?

ValueWalkPremium is a website and newsletter for smart investors like yourself. We focus on the latest hedge fund industry news much of which is not in the public domain and obtained via our sources.

We also have 10 years of resources on how to use this information to better your investment process.

Sign up for  today for only a few dollars a day and get a 3 day no obligation trial with a targeted 20% discount coupon code.

Cancel anytime during trial and you are never charged.

Limited time offer: For first 50 subscribers

0