Funds of hedge funds continue to lose assets this year – from $360.4 billion in the fourth quarter 2016 to $343.3 billion in the first quarter of 2017. In Wealth Management’s 2017 Midyear Outlook, Gemini (now Ultimus Fund Solutions) Hedge and Alt President, David Young, discusses this trend and how funds of hedge funds must adapt to survive.
“Historically, FoHF managers would choose hedge fund managers to allocate to, pay each manager their requisite fee, and be subject to the limitations of investing in the managers’ funds. In turn, FoHF managers would charge their own fees… and also impose additional restrictions. This created a very expensive, opaque structure with many layers of fees and restrictions.
“Today, though, investors expect lower fees, full transparency, and greater control and insight into their investments… This is why more institutional investors are… utilizing other options for investing in hedge funds.”
“… Managed account platforms offer one such alternative. Investors that invest in hedge funds through managed accounts have the flexibility to negotiate favorable fees and terms with the managers of the funds in which they invest… [FoHFs] should respond to the change in mindset among investors by adapting their business model to meet investor expectations.”
To read the full article, click here.