The metamorphosis of the fund of funds industry

Wed Apr 11, 2007

Niki Natarajan, publisher & editor-in-chief, InvestHedge

The funds of hedge funds industry is moving into a phase of conscious competence. Until 2006, product providers still dictated the rules of the game, resulting in general chaos - large funds versus boutiques, multi-strategy versus niche and all versus multi-strategy single managers. Moreover, there was an increasingly large overall correlation to the equity markets.

The term, conscious competence, refers to the third stage of learning, but this learning is being driven by the fact that institutional investors are finally understanding how hedge funds fit into the equation but are still not 100% confident. Multi-strategy multi-managers are still popular with first-time buyers and, generally, the big-name, large asset-base, process-driven groups are still winning this game.

That said, investors fed up with mediocre performance, the high double layer of fees, and rigid product guidelines have started to see the emergence of alternatives such as listed funds of...

ISSN: 2151-1845 / CDC10004H

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