Fund of Hedge Funds (FoHFs) are an important channel into hedge fund investing, as they offer small hedge fund investors instant diversification and investment monitoring that they may not otherwise be able to achieve through direct hedge fund investing. However, multiple layers of fees have historically discouraged some investors from pursuing this type of investing structure, regardless of the value it may provide.
As a FoHFs manager, you are under pressure to reduce the costs related to management of assets for your clients. An Ultimus Dedicated Managed Account (DMA) may be the solution, as this structure provides the exact controls, services, and reporting required to manage your investments in a cost-efficient and scalable way. Importantly, a DMA gives you the flexibility to negotiate strategy customization, investment guidelines, and management and performance fees with each underlying fund manager, which could potentially result in a reduction in investing costs. The structure also improves investment control and transparency, and provides the liquidity your investors may be demanding.
Through a DMA, the FoHF can be the sole investor, so you have full ownership and control over the account. You select preferred trading advisers, custodians, Prime Brokers (PBs) / Futures Commission Merchants (FCMs), and other service providers, and your account and each underlying fund are linked together only through an Investment Management Agreement. This structure provides the exact controls, services, and granular reporting you need to make more informed investment decisions.