Blackstone tops rankings as global funds of hedge funds industry resumes growth

Thu Mar 10, 2011

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Says InvestHedge Billion Dollar FOHF Club survey


• The big players in funds of hedge funds gained approximately $29bn in assets in 2010 despite outflows in the first half of the year
• Firms with more than $1 billion in assets ended the year with a combined amount of $625 billion
• $226 billion is in the hands of the 10 largest FOHF managers
• 109 FOHF managers have $1 billion or more in AUM
• Blackstone Alternative Asset Management has emerged as the largest funds of funds group in the world

(London, 7 March 2011) - The global funds of hedge funds industry, as represented by the largest players who run assets of $1 billion or more, turned a corner and grew again by 4.8% in the second half of 2010 after continuing to lose assets in the first half of the year, according to the 10th annual InvestHedge Billion Dollar FOHF Club survey. The industry had been hit hard by the financial crisis, with billion dollar club assets falling from over $1 trillion at their peak in 2007 to less than $600 billion by mid- 2010.

The growth in assets is now back in line with the average funds of hedge funds performance of 4.89% in 2010.

Funds of hedge funds with more than $1 billion under management now control a combined total of $625 billion in assets, up from around $595 billion in mid-2010.

The top 10 firms added nearly $20 billion and grew by more than 9.6%, double the industry average, proving as many suspected that the larger, more established players are flourishing. The 10 largest firms now manage $226 billion, and need to gain only a further $74 billion to reach the all-time high of $300 billion at the end of 2007.

"Many investors who began directly allocating to 'brand name’ hedge funds have begun to feel the strain, finding themselves with hefty overlaps of managers and in some cases their money being returned. As such, the fund of hedge fund industry has a second chance to show that the access and expertise it offers is worth an extra layer of fees. The best managers certainly do this – as we will find out on 10th March at the InvestHedge performance awards in New York," says Niki Natarajan, editor of InvestHedge, the leading publication about investors in hedge funds.

"The industry is changing and the need for savvy, experienced investors is greater than ever before. More than 63% of the global fund of funds industry is now offering bespoke services. To get this right, a firm needs to demonstrate excellence as a commingled manager and a proven track record of performance."

Of the 109 funds of hedge fund management companies in the InvestHedge Billion Dollar FOHF Club, Blackstone Alternative Asset Management has emerged as the largest group in the world over the course of 2010. Blackstone added more than $5 billion in fund o funds assets last year, growing by 18%. UBS Global Asset Management A&Q, now with total assets of $24.2 billion, has dropped to third place.

HSBC Alternative Investments is now number two with funds of hedge funds assets of $28 billion, although it has $36.8 billion in total alternatives including custody. At number six, Permal Investment Management, which is owned by Legg Mason, grew by 11.34%, while Lyxor Asset Management entered the top 10 for the first time despite its assets dropping a little in 2010.

The complete list of winners by category:

Top 10 largest Funds of Funds 31 Dec 2010
$bn
Blackstone Alternative Asset Management 32.92
HSBC Alternative Investments 28.00
UBS Global Asset Management A&Q 27.55
Grosvenor Capital Management 24.03
Goldman Sachs Asset Management 22.30
Permal Investment Management 21.60
BlackRock Alternative Advisors 18.90
Morgan Stanley 18.37
Pacific Alternative Asset Management Co. 16.60
Lyxor Asset Management 16.01
Total 226.28
Source: InvestHedge

**ENDS**

About HedgeFund Intelligence and InvestHedge

InvestHedge is the ultimate source of information on those investing in hedge funds including institutional investors, family offices, and fund of funds throughout the world. It is published by HedgeFund Intelligence, the biggest provider of hedge fund news and data in the world with the largest and most knowledgeable editorial and research teams of any hedge fund information provider.

For more information, please contact:

Niki Natarajan, Editor of InvestHedge + 44 (0) 207 779 7360 nnatarajan@hedgefundintelligence.com

Toby Bates / Del Jones, Merlin +44 (0) 20 7726 8400 / tbates@merlinpr.com or djones@merlinpr.com

ISSN: 2151-1845 / CDC10004H