Mid-sized FoFs Saw AUM Rise In 2011

Feb 10 2012 | 11:21am ET

Mid-sized fund of hedge funds managers—those with $1 billion to $5 billion under management—saw their AUM rise 10%, on average, in 2011, according to the latest numbers from Preqin research.

In total, 24% of fund of hedge funds managers reported an increase in AUM during the course of 2011, an increase of 7 percentage points on the proportion that enjoyed an increase between 2008 and 2009.

Big managers, on the other hand, those with over $10 billion, saw their assets under management decline 2.1% on average last year. Such large funds account for 5% of all managers, but 45% of industry assets.

Preqin says investors remains cautious in “the uncertain economic environment,” as evidenced by the decline in assets reported by 25% of managers.

Over the past 12 months, assets in funds of hedge funds have reached $945 billion, up from $910 billion at the beginning of 2011.

The proportion of fund of funds managers with less than $250 million in AUM continued to increase in 2011 and now stands at 38%.

Funds of hedge funds remain attractive to smaller investors looking to make their first commitments to the asset class.

Amy Bensted, head of hedge fund research at Preqin, said that “2011 was a difficult year for the hedge fund industry due to poor performance and investor caution. However, institutional investment in hedge funds is predicted to increase during 2012, meaning that fund of hedge funds managers need to react to investor demand if they are to be on the receiving end of a proportion of these assets.

“Investor demands for better fee structures, increased transparency and flexibility in their underlying investments is likely to lead to a surge in niche strategies and innovative products as managers look for ways to attract institutional capital ahead of single managers.

“If managers react to the changing demands of investors, the fund of hedge funds industry has the potential to grow further, and for AUM to reach the $1 trillion mark once more.


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